By Anand James
FIIs increased their Future Index Long positions by 0.65% on Friday, while reducing their Future Index Short positions by 2.02%. Despite being feeble, the rise in index future longs is noteworthy, as it is the first such increase, since 27th September. Meanwhile, there is no reason to go overboard on the prospects of a short covering rally, as the short positions had not reached extremes to warrant a major reversal. Yet, there is enough evidence to kickstart the new with positive grounds.
Nifty and Nifty Bank differently positioned
What was on display on Friday was traders adopting a risk-on approach, feasting on the bargains available as Nifty slipped below the recent low in opening trades and sunk to the lowest since late August. Post the upswing that followed, 44% of the Nifty 50 constituents are now trading above their respective 10-day SMAs, which is indeed a sign of resilience. This figure is the highest since 1st of October 2024. But, this recovery is yet to become broad-based, as Nifty 500 and SMIDs continue to lag. We shall hence pin our hopes on fast stochastics signalling a bottom formation while seeking confirmation from a pushback above 24950. Towards this end, we retain our last week’s view of 25390. The downside marker meanwhile would be at 24770, with supports below seen at 24470 and 23900.
Since the majority of Nifty Bank constituents are yet to announce their figures, traders appeared more inclined to take a risk on approach, especially since we are coming off a low base. So, the earnings flow provides a tailwind for now but could emerge as a source of volatility as well, as the next week progresses. Incidentally, Nifty Bank had corrected 7.8%, from September peaks, as opposed to Nifty’s 6.5%. Though the 20-day SMA at 52375 could pose some challenges to Nifty Bank’s ascent, we are counting on the oscillator divergences as well as Friday’s bullish engulfing pattern to provide enough momentum to see 53000.
Sector cues:
FMCG is vulnerable. As expected last week, the Nifty FMCG index saw selling pressure and was the third biggest loser this week after Auto and Media. The Nifty FMCG index met our downside targets of 61150 and 60900. We might see some pullback from current levels but we would remain sellers on such pullbacks. Expect 59500 to be good reversal points for the Index on the downside.
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