It appears that Nifty’s fall below recent lows has encouraged Foreign Institutional Investors (FIIs) to position for a swing higher, judging by the 16% increase in index future longs to 28,237 contracts on Friday. However, it needs to be read with these compelling data points as well.
Firstly, some FIIs increased their speculative long positions, some FIIs also added to index future shorts, swelling the number of short contracts by 4% on Friday, resulting in a week-on-week increase of 17%, to end at 2,99,084 contracts. The index future longs saw an 8% decline on a week-on-week basis. Consequently, the long-short ratio of FIIs in the index future segment stands at 8.6, not far from a record low.
Also note that while 58% of the total index future longs are held by retail clients, 72% of total index future shorts are held by FIIs. Meanwhile, proprietary traders hold 24% of the total index future long positions, which is higher than their 30-day average, the second highest proportion after retail clients.
Being more influential than clients, whose impact is more scattered, the proprietary position points to hopes of a recovery swing in the coming week, potentially around expiry. This positioning in index options longs also matches with their positioning in index future longs, which, at 15.6% of total index future long positions, is also higher than the proprietary traders’ 30-day average.
Nifty Financial Services Index: Bears retain near-term control
The Nifty Financial Services Index continues to display a weakening near-term structure after facing rejection near the upper boundary of its ascending triangle pattern.
This failed attempt to sustain higher levels suggests that the earlier upside momentum is beginning to lose strength, with sellers reasserting pressure around resistance. The index has already started drifting lower from this zone and is now moving closer to its immediate pattern support placed around 25,350 and then 25,300.
Momentum indicators also reinforce the cautious view. The weekly MACD histogram is showing visible signs of exhaustion, indicating that bullish momentum has moderated after an extended upmove. At the same time, the RSI continues to hold above the 40 level, which implies that there is still room for further downside before the index enters a deeply oversold zone.
The combination of resistance-led selling, fading momentum, and proximity to key pattern support keeps the risk of a corrective move elevated in the near term. A sustained break below 25,300 could open the door for a deeper decline, while any recovery attempt is likely to encounter supply near recent highs. The near-term bias is likely to remain in favour of the bears unless the index succeeds in moving back above the resistance zone on a sustained basis.
Nifty Pharma Index: Near-term risks remain elevated
The Nifty Pharma Index is now approaching an important rising trendline support placed near 25,350, a zone that could attract buying interest and trigger a short-term pullback towards 26,300. However, despite the possibility of an interim rebound from this support area, the broader setup remains vulnerable as momentum has cooled following the strong rally seen earlier.
The derivatives segment continues to paint a more cautious picture, suggesting that traders have become less confident in maintaining bullish exposure. Around 65% of pharma stock futures witnessed profit booking on Friday, while nearly 90% showed unwinding on a week-on-week basis. This suggests that traders have been steadily trimming long exposure rather than adding fresh bullish bets, thereby weakening the index’s near-term support base.
Technically, the index is now testing a make-or-break zone. While the rising trendline support could still spark a brief recovery attempt, a decisive break below 25,300 would confirm a bearish breakdown and expose the index to a deeper corrective move towards 24,900-24,850. Until the index manages to reclaim strength above the immediate resistance zone, near-term risks are likely to remain elevated.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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