As Nifty touched its lifetime high after 14 months at the start of the December expiry series, experts see this positive momentum in the market continuing.
Osho Krishan, chief manager of technical and derivatives research at Angel One said, December started off on a positive note as Nifty surpassed the crucial 26,000-mark led traders to cover their short positions. He noted that the long short ratio has also improved from 12% to 19%.
On Thursday, the Nifty 50 index touched its all-time high of 26,310.45 points after it fell 0.7% in the November expiry. Meanwhile, BSE Sensex, whose expiry day is Thursday gained 2.12% as it hit its all-time high of 86,055.86 points on Thursday.
Caution Beneath the Surface
Krishan added that most forward moves are long additions. The Nifty futures rollovers fell to 69% compared to 81% in the last three series.
According to a Nuvama report, the Nifty futures will start the December series at a lower open interest base of Rs 37,700 crore (14.6 million shares) compared to open interest of Rs 39,300 crore (15.2 million shares) seen at the start of November series.
It noted that the strength in headline indices masked significant weakness beneath the surface. “Rollover activity remained consistent with recent trends, though participant positioning has notably pivoted away from mid and small-cap exposure toward larger stocks,” it said. “With retail participation in individual stock derivatives at unprecedented levels, the mix creates vulnerability to forced unwinding should market conditions deteriorate further.”
Motilal Oswal believes this swift recovery in November appeared to be driven more by short covering than by the addition of meaningful fresh longs. “On an expiry-to-expiry basis, Nifty formed a strong bullish candle with an extended lower shadow, highlighting consistent buying interest at declines and a firm comeback by the bulls,” it said.
It also noted that even as the benchmark indices hovered near record highs, market breadth weakened in November due to late-series pressure in midcap and smallcap counters. Krishan expects the sectoral rotation to continue and sees strong momentum in private sector banks and NBFCs followed by auto. He also expects a reversal in IT stocks but noted that this will be dependent on IT stocks.
Economic Drivers and Sectoral Bets
In the next two weeks, the Nifty can touch 26500-700 levels given that 25,850 and 25,750 are providing strong support at the lower end.
Participant wise, Nuvama pointed out that FIIs have added index shorts while they added stock specific futures (SSF) longs. The HNI & Retail or Client category has reduced longs in Index while adding SSFs. It said: “FIIs added index shorts while building SSF longs, reflecting caution on broader markets but selective optimism in individual stocks. Clients trimmed index longs but aggressively added SSF longs.”
Vikas Gupta, CEO & Chief Investment Strategist at OmniScience Capital, said: “The GDP data at 8.2% real growth rate is likely to fuel further optimism for the next week. Industrials and Manufacturing combined with Services, especially financial services and banks are likely to see a sharp positive impact. Similarly, GoI-spending driven sectors are also likely to benefit, such as, Defence, Railways, Power, etc. The focus should be on the longer-term impact, where strong manufacturing and exports growth, steel consumption, double-digit bank credit growth are indicative of future economic health, all combined with a low inflation.”
