The brief bounce and quick fall back below the 200-day SMA on the Nifty points to potential for large falls. In fact, the Nifty50 is just late to the party, with 85% of NSE 500 stocks having already fallen below their respective 200-day SMA.
The Nifty Metal Index appears to the sector with the largest proportion of constituents above this key benchmark SMA. On the other end of the spectrum, the realty index has none of the constituents above this key benchmark, while the consumer durables index has just 6.6% of constituents doing so. With Nifty 50, 65% of the constituents have managed to fall not more than 5% from their respective 200 day SMA.
In stark contrast, more than 60% of the constituents of the Nifty 500 index are trading more than 5% from this key benchmark moving average. Among the Small Cap 100 Index, only about 14% of the constituents are trading above this moving average, suggesting that a clear risk off approach is in play. From a contrarian point of view, it also suggests that positive surprises can bring back risk on trades, and smaller capitalised stocks could be the first to lift off.
FIIs seen adding longs
The long short ratio of FII index future portfolio is still not far from a record low. At 14.7, it has risen to the highest since early December. This is not because they have started reducing their shorts. In fact, they have added 8.9% to their shorts on Friday, taking the total number of index future shorts to 2.74 lakhs. However, a whopping 30.95% boost of longs has come against the run of the play, lifting the index future longs to 47,222 contracts, the highest since late October 2022. We are led to believe that this could be either be an early sign to a broad-based recovery or a speculative increase in one of the indices ahead of the Budget presentation.
Fear peaking in Nifty Bank
Nifty Bank has lost momentum after breaking its consolidation support last week on strong volumes. The weekly chart has formed a bearish Marubozu candle, while a negative MACD crossover has further reinforced the weak sentiment across the banking space.
On the derivatives front, most constituents showed either short build-up or long unwinding during Friday’s trade. Nearly 80% of the basket witnessed long unwinding on a weekly basis, reflecting that F&O participants are positioning for continued downside.
From a stock-specific perspective, private majors such as HDFC Bank and Axis Bank, along with PSU names including SBI, Bank of Baroda, PNB, and Canara Bank, are displaying signs of profit-taking and potential weakness ahead.
Given this setup, the Nifty Bank index could drift lower towards 57,720, with deeper support seen near 57,100 in the near term.
Nifty eyes further weakness
The Index, which had been trending higher since breaking above its falling wedge resistance in early 2025, now appears to have lost steam. A decisive breach of the rising wedge support on the weekly chart signals scope for further downside.
Momentum indicators echo this weakness — the weekly MACD has triggered a bearish crossover, while a strong bearish candle on the monthly chart underscores the deteriorating trend. Derivatives positioning also points to growing pessimism, with nearly 80% of contracts showing either short build-up or long unwinding, suggesting traders are bracing for continued declines.
In the auto space, M&M, Maruti, TVS Motor, Eicher Motors and Bharat Forge exhibit weakness across both daily and weekly timeframes. Persistent selling pressure in these names could weigh further on the index, potentially dragging it towards the 26,370 level in the near term.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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