Twin attempts to breach the 25,900 mark and an equal number of efforts to pierce past the 25,450 region proved unsuccessful, reflecting a standoff between bulls and bears. What was more striking, though, was the rise in trading range, or in other words, volatility. This would be the major theme going forward.
FIIs appear to be easing the bearish stranglehold
FIIs boosted their longs in the index future segment by 13.3% on Friday, lifting the total long contracts to 68,265 contracts, the highest since May 2025. Consequently, the long-short ratio of the FIIs in the index segment has risen to 25.3, a visible indication of FIIs easing their bearish view.
The last time this ratio was above this level was on 27 October 2025. Incidentally, shorts were at 1,64,512 contracts at that point, which was much less when compared to the 2,01,929 contracts held as shorts now, pointing to much room for further short covering.
Volatility expectations
The market continues to price up near-term uncertainty, with Friday’s candle showing follow-through and not just a one-off spike in volatility. That tilts the balance toward continued choppy trading in the immediate term. We are at the upper band of recent VIX, which is consistent with risk-off or hedging demand still being active.
By definition, VIX reflects the expected 30-day volatility derived from Nifty Options order books, and elevated levels often coincide with risk aversion. Formation of gaps along with failed rallies and failed gap-piercing downsides with VIX greater than 14 implies higher realised volatility risk. Data from the last 3 months show that super-spikes tend to cool quickly, but Friday’s move is a strong follow-through rather than a fresh super-spike, lowering the odds of an immediate fade unless global cues calm materially.
PSU Banks extend breakout supported by strong derivatives momentum
The Nifty PSU Bank index has continued its upward trajectory, registering a strong weekly breakout near 9,650 on robust volumes and a close above its recent consolidation band.
Prices remain well above rising moving averages and the cloud, underscoring the strength of the ongoing trend. Momentum indicators remain supportive, with RSI holding above 70 and MACD staying firmly positive with an expanding histogram, signalling persistent bullish strength.
On the derivatives front, 85% of PSU bank stock futures saw short covering on Friday, with a 100% short-covering print on a week-on-week basis—indicating a broad transition from a defensive stance to aggressive long positioning. Several heavyweight constituents have also formed bullish Marubozu candles on the weekly chart, reinforcing the near-term positive outlook.
Immediate resistance is placed at 9,900–10,050; a breakout above this zone could pave the way toward 10,500–10,800. Dips toward 9,350–9,450 are expected to find strong buying interest, with the broader trend remaining firmly positive as long as the index holds above 9,300 on a weekly closing basis.
Momentum improving in Defence Index amid broadbased short covering
The Nifty India Defence Index is showing early signs of trend recovery after respecting support at the 7,300 zone and forming a series of higher lows on the weekly time frame.
The latest upswing has carried prices back toward the upper boundary of the consolidation range, supported by RSI moving above 50 and MACD beginning to turn higher as the negative histogram narrows—both indicating improving momentum. A sustained close above 8,150–8,200 would confirm a breakout and open targets at 8,550 and 8,900.
Derivatives data also reflect strengthening sentiment: 67% of defence-sector futures saw long build-up on Friday, while the remainder witnessed short covering. All constituents recorded week-on-week short covering, indicating traders positioning for further upside.
The setup remains favourable as long as the index holds above 7,600–7,450, with a breakout above 8,200 likely to trigger the next leg higher.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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