Last week had begun with doubts as to whether the low momentum would be enough to continue the onward journey. Nifty exceeded all expectations and made large strides higher through the week. In contrast, the doubts this week are with respect to whether we would be entering the Muhurat day red hot, without enough window for a bargain buy.
FIIs begin short covering but need to gain pace
The long-short ratio has risen above 10 and is close to levels last seen near the September expiry, after which the ratio had plummeted sharply to a record low. While longs have started to build, the covering of shorts is yet to gain pace.
The prospects of the same give further hopes of extension in a broad market uptrend. While there are signs of the same, it is too early to confirm, as the long-short ratio is still closer to record lows than historical averages.
Broad market cues
With 76% of Nifty constituents above the 50-day SMA, the highest in more than a month, clearly, the benchmark index is on a strong uptrend. However, this is not as much reflected in the broad market, with only 50% of the Nifty 500 constituents pushing above this key benchmark by Friday.
This signals that there could be more legs to the uptrend, with so many stocks yet to push higher, but it could also be read as reluctance to stretch any further. With Nifty too, highest OI is near 26000 in both the Monday expiry as well as the monthly expiry, pointing to limited upside from here on. It is also counterintuitive that only 51% of Nifty 500 constituents have pushed beyond even the 10-day SMA, confirming the reluctance across the broader market to participate in the rally with as much vigour as the benchmark indices. Perhaps Muhurat trading day could give us more signals.
Realty Index: Dip-buying strategy gains favour as momentum eases
The Nifty Realty Index has recently broken above its Supertrend level and cleared a key consolidation resistance, signalling a bullish undertone. The weekly chart setup looks increasingly constructive, with indicators such as a potential MACD crossover and the RSI climbing above its moving average—both pointing to renewed buying interest on short-term declines.
The average RSI for the index’s major constituents hovers around 60, reflecting healthy momentum. However, stocks like DLF, Lodha, Godrej Properties, Oberoi Realty, Phoenix Mills, and Prestige Estates appear slightly stretched in the short term, despite maintaining a positive long-term outlook.
Given the recent rally and signs of fatigue among key stocks, a dip-based entry strategy is preferred early in the week. The index is expected to trend toward the 958–980 zone once consolidation plays out.
PSU Bank Index: Momentum wanes, pullback likely
After a sustained uptrend since August, the Nifty PSU Bank Index is beginning to show signs of fatigue. Reversal candles on the daily chart, including a Doji formation, along with fading MACD histograms on the weekly timeframe, suggest weakening momentum. A bearish MACD signal break on the daily scale further supports the case for a short-term pullback.
Despite this, the monthly chart remains robust, indicating that any decline may be shallow and could attract fresh buying interest. Derivatives data also points to near-term caution, with about 70% of near out-of-the-money call options seeing short additions and roughly 40% of near OTM put options witnessing long buildup—both signaling bearish sentiment.
Among the index constituents, Bank of Baroda, PNB, IOB, Union Bank, Canara Bank, and Bank of India have formed Doji or reversal patterns, hinting at potential declines. SBI, however, continues to show resilience and may offer support to the index. Should SBI falter, the index could swiftly retreat toward the 7,500 and 7,380 levels thereafter.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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