Earlier, we had pointed to a high buildup in FII index future shorts matching that of April’s pattern, suggesting that the recovery that followed in April could also be expected now. The pullback ensued last week. The pullback attempt echoes such expectations, even though we are yet to break free from the bear grip.
The index future shorts are now 3,36,834 contracts, up 3.2% over last week, while the longs rose 17.3% on a week-on-week basis to 48,406 contracts. This resembles the slow buildup in March, prior to the sharp rise in Nifty in April. Meanwhile, the long-short ratio has not risen much, but at 12.6, we are the highest since 12 August, 2026, and supports Nifty’s upside expectations.
Is the bounceback sustainable?
Except for pharma, all major Nifty sectoral indices continue to trade below their respective 20-day SMAs, but all except consumer durables and IT have pulled back above the 5-day SMA.
This suggests that a bounce back is in play but requires further confirmation for sustainability. With this in the backdrop, let us look at the following sector ideas on that note.
Metal Index rebound may offer a sell-on-rise ppportunity
The Nifty Metal Index is attempting a short-term rebound after momentum indicators began showing signs of exhaustion. The MACD histogram is stabilising, while the RSI is recovering from near-oversold territory. Together, these signals could support a pullback towards the 13,220 zone.
However, this area also lines up with the upper boundary of the rising channel and is therefore likely to act as a strong resistance zone. The broader setup, however, still calls for some caution. Any move towards 13,220 could invite fresh selling pressure, particularly if the rebound begins to lose momentum near resistance.
A sustained breakout above this level would improve the outlook and create room for further gains, but that currently appears to be the less likely scenario. Derivative positioning also reflects limited bullish conviction: only about 45% of out-of-the-money put strikes saw short additions, suggesting traders are not yet positioning aggressively for a stronger up move.
The 12,900 level remains the key support to monitor. If the index fails to hold above it, bearish momentum could return and pull the index lower towards 12,350. For now, therefore, any rally is likely to be viewed as a selling opportunity unless the index manages to decisively break above 13,220 and sustain the move.
FMCG Index shows early signs of reversal
The Nifty FMCG Index is beginning to show early signs of a possible trend reversal after an extended corrective phase. On the weekly chart, an inside-bar Doji has formed near an important support area, highlighting indecision and suggesting that a directional move may be taking shape. The momentum setup is also showing early signs of improvement. The weekly MACD histogram is showing exhaustion in the prevailing downtrend, while the daily MACD has produced a bullish signal-line crossover, indicating that the intensity of the selling pressure is gradually easing.
Derivative data adds further weight to the recovery case. Around 55% of FMCG stock futures witnessed short covering on a week-on-week basis, suggesting that traders are gradually unwinding bearish positions. While this does not yet amount to a decisive bullish shift, it indicates that negative sentiment towards the sector is beginning to ease.
Stock-specific action is encouraging as well. Heavyweights such as ITC, Hindustan Unilever and Nestlé India appear to be building a base and attempting a reversal, which could provide useful leadership to the broader index. A clear confirmation is still awaited, but the improving momentum backdrop and easing derivative pressure suggest that the FMCG pack may be preparing for a more meaningful recovery over the coming weeks.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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