FII Index Future long-short ratio is at 11.2, largely unchanged throughout the week, and also in comparison with the 11.1 seen the previous day. But one look at FII action along longs and shorts separately suggests that there has been brisk activity along both sides that betrays the apparent calm depicted by the ratio.
FIIs added longs by 22.5%, lifting long positions to 41,252 contracts, the highest since June, while shorts were boosted by 21% to 3,26,134 contracts, the highest since April. Incidentally, Nifty FIIs’ short positions had dipped after April, which also coincided with a rise in Nifty. This construct encourages us to expect a similar outcome shortly.
Except for metal and energy indices, major Nifty sectoral indices have all sunk below their respective 10-day SMA. However, the pullback on Friday lends hope of a mean reversion and upmove.
Let us look at the following sector ideas on that note –
Auto Index vulnerable despite scope for short-term pullback
The Nifty Auto Index continues to show a weak technical structure, although near-term oversold signals leave some room for a brief pullback. A pin-bar Doji on the daily chart, along with signs of exhaustion in the MACD histogram, suggests that selling momentum may pause temporarily.
Even so, the broader trend remains bearish after the index slipped below an important Fibonacci support level. The Point & Figure chart also remains subdued, with the index still trading below the recent column-high resistance zone and yet to produce a convincing reversal signal.
The index has also pulled back from the resistance line of a rising wedge pattern, a formation that can often be followed by a deeper correction. Short recovery attempts may still emerge, particularly from oversold levels, but they are likely to meet renewed selling pressure in the 27,775–27,900 zone.
For the outlook to improve meaningfully, the index would need to reclaim 27,900 and sustain above it on a closing basis. Until that happens, the underlying weakness is likely to remain in place.
On the downside, immediate support is seen at 26,700, followed by 26,300. A decisive breach of these levels could intensify selling pressure and increase the likelihood of the index moving towards the lower boundary of the wedge formation, near 25,300, over the medium term. Traders may therefore want to watch how the index behaves around these support zones before expecting a more durable recovery.
Metal Index Breaks Trend Support, Downside Risks Increase
The Nifty Metal Index has turned technically weak after slipping below the support line of its rising trend channel. This breakdown points to a clear loss of upward momentum and raises the possibility of a deeper corrective phase. Momentum indicators have also softened, with the MACD moving back below the zero line. Together, these signals suggest that bearish pressure is beginning to take control again and that any near-term rebound may struggle to sustain itself.
Derivative positioning adds weight to this cautious view. Around 60% of out-of-the-money put strikes recorded fresh long additions, while nearly 80% of in-the-money call strikes saw short build-up. This combination points to expectations of limited upside alongside increasing demand for downside protection. In addition, about 60% of the constituent stock futures registered fresh short additions on a week-on-week basis, indicating that traders are not only maintaining bearish positions but, in several cases, adding to them.
Attention now shifts to the important horizontal support at 12,790. A sustained break below this level could trigger stronger selling pressure and open the way towards 12,400. On the other hand, any recovery is likely to encounter resistance near 13,220, making that level an important hurdle for the bulls. Overall, both the technical structure and derivative positioning indicate that the path of least resistance remains lower unless the index can regain key resistance levels with conviction.
About author
The author is Anand James, Chief Market Strategist at Geojit Investments.
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