By Anand James
We had started last week noting that Nifty is at an inflection point. While we had our eyes on continuation of uptrend, we had stopped short of confirming the ascent to 23,000-23,450 objectives because, historically, the bounce from sub 25 RSI levels usually takes a W shaped recovery instead of the vertical recovery that is now in place. This held us back from the conviction that the upmove finally deserved. Infact, while Nifty took 10 trading sessions to move from the lower to the middle bollinger band, it took just three sessions to travel the upper half. These This screams of a roaring recovery rally. Let us now see there is enough fuel to extend upsides, or if it is time to turn lower. Again.
FIIs’ short covering picking up pace
FIIs who had continued to press on with record high shorts through the October 2024 to March 2025 period, have begun to loosen their stranglehold. Since the shorts were persisted with even during a period of 1,000 upswing during this bear phase, we looked back to see if there is historical evidence of any pattern. We found that since Jan 2022, there were 7 instances during the period where index future longs fell below 20%. We digged a bit deeper and observed the following:
- On 6 out of 7 such occasions, when index future longs (IIFL) proportion swung back above from sub 20 levels, IIFL % went on to rise to minimum of 55.7%.
- On average, it took about 43 days to peak, with the lowest number of days recorded at 13 and the highest being 107 during the bull phase between January and July 2023.
- Nifty recorded an average gain of 9.86% during this phase of uptrend. (From the first instance of breaking below 20 and then subsequent peak.
- At present IIFL has spent 60 trading sessions after dropping below 20 and was yet to cross above 30 until Friday. This duration is only behind the 107 recorded during the bull phase between January and July 2023.
- During this period, there were 250 instances of IFL dropping below 30, with 21.6% of these occurring in 2025. Among those recorded in 2025, 89% fell to levels below 20.
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