On the face of it, FIIs appear to have persisted with the negative stance last week, as was the case in the previous week too. The long-short ratio of their positions in the index futures segment was last seen at 11.4, only a moderate increase from the 11.1 seen by the close of the week before. While this does not suggest a change in FII’s stance, there is indeed a subtle change underway.
Though long positions were hardly changed at 19,263, when compared to last week’s close of 19,756, Friday registered a 15.6% increase in positions when compared to Thursday. While this can be seen as momentum building up along long positions, a more powerful narrative can be made out of short positions, which at 1,49,509 contracts, marks a near 6% cut on a week-on-week basis. This is the second consecutive week of declines in short positions, which indeed supports the surmise that a short covering move is potentially around the corner.
New leaders emerging
Over 70% of Nifty 500 constituents are now trading above their respective 20-day SMA, the highest in over a month. Bank Nifty has the maximum number of constituents above key benchmark averages, among indices. As a sector, banks contributed 28% to the Nifty’s upmove in the last three days, toppling IT, which was the maximum contributor during Nifty’s upmove since November. This shows that new leaders are apparently emerging.
Meanwhile, the infrastructure segment has slipped in terms of contribution, overtaken by Automobiles, which have increased their contribution to Nifty’s move to 9.4% in the last three days, when compared to around 5% during the Nov-Jan period.
Meanwhile, the Nifty FMCG index is trading over 3% below the 10-day SMA, and also below 20, 50, and 200-day SMAs, emerging as a laggard and potential bargain-hunting candidate. Nifty IT index had lost momentum recently and but is currently trading very close to its 10- and 20-day SMA, and 2.9% above its 50-day SMA and 4.9% above its 200-day SMA. The Nifty Metal index is 7.4% above the 20-day SMA, and thereby the farthest among key indices, while Nifty PSU Bank and Nifty Auto indices are close by when measured along this metric, at 4.3% and 3.6% above their respective 20-day SMAs.
IT Index: Pullback Gathering Strength
After a profit-booking phase since mid-December, the Nifty IT Index is showing signs of recovery from the 37,800 zone. Momentum indicators support this rebound, with RSI holding above 50 and the MACD histogram signalling a reversal on the daily chart. Derivatives data also reflects optimism, as nearly 80% of near OTM put strikes witnessed short build-up, suggesting expectations of an extended pullback.
Index heavyweights, including TCS, Infosys, HCL Tech, Tech Mahindra, LTIMindtree, and Persistent Systems, have formed reversal chart patterns, positioning them to reinforce the move. This could drive the index toward 38,700 and 38,900 in the short to medium term.
Auto Index Breakout: Upside Potential, Pullbacks Favoured
The Nifty Auto Index has surged past the horizontal resistance at 28,060, triggering a rally of nearly 800 points. A strong bullish Marubozu candle on the weekly chart underscores positive sentiment, pointing to further upside in the near term. Derivatives data adds weight to this view, with most stock futures showing long build-up on a weekly basis, signalling traders are positioned for continued gains.
On the stock side, Mahindra & Mahindra, Maruti Suzuki India, Bajaj Auto, Bosch, Hero MotoCorp, and Ashok Leyland look technically strong and could propel the index toward 29,000 and 29,800 in the medium term. However, with short-term momentum indicators now in the overbought zone, traders are advised to seek buying opportunities on pullbacks rather than chasing elevated prices.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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