By Anand James
We started last week pointing at the seasonality advantage that March holds, in a frantic search for a glimmer of hope amidst the sell on rallies mode that had persisted until then. One of the silver linings was that since 2016, when the Nifty Midcap150 and Smallcap250 indices experienced two consecutive months of decline, the following month saw an average return of 8%, more than 70% of the time. Despite such hopes, last week saw Nifty complete a 10 consecutive day decline, the longest losing streak since inception in 1996. Fortunately, such an extreme scenario ended up triggering a mean reversion move that would swing over 600 points on the Nifty attracting a broad-based buying interest.
FIIs yet to budge
The concentrated holding of index future shorts continues to persist despite the large jump in Nifty last week. This reminds us of the same stubborn persistence with index short positions despite a 1,000 point jump after the 27th January. Incidentally, after this rise Nifty would fall about 2,000 points, vindicating FII’s short index preference. The present persistence with shorts cautions us of such a turn of events. Further, FIIs continue to show a preference towards puts over calls, on both the long as well as the short side. They hold 8.3L contracts as index put longs as opposed to 6.5L contracts as index call longs, while they hold 5.2L contracts and 4.7L contracts as index put and call shorts respectively.
FMCG to sweeten
After the rising channel break in November 2024, the index has been falling and has erased around 13%. However, the daily charts have seen reversal candle patterns and the short-term momentum indicator MACD has crossed the signal line from below and a Piercing candle pattern in the weekly timeframe is hinting at possible short-term upside in coming weeks. We expect the index to move towards 52,600 and thereafter 53,250 led by stocks like Hindustan Unilever, ITC, VBL, Godrej Consumer Products, Dabur, Tata Consumer, United Spirits, Marico and Colgate Palmolive.
A quick bounce possible in Realty
The realty index has fallen close to 30% since December 2024 and has corrected close to the Fibonacci 50% level of 766. We have seen a weekly reversal candle along with weekly MACD histogram showing exhaustion hinting at a possible reversal.
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