Overseas portfolio buyers’ long-to-short ratio, an indicator of total bullish versus bearish positions of overseas buyers, in index futures was at 17.2%. When the studying is at 12-18%, the bearish positions are thought-about excessive. It touched 13.5% on January 1 and rebounded as overseas buyers lower their bearish positions amid the market bounce.
Too A lot Bearishness?
Analysts are, nevertheless, contemplating the long-short ratio of FPIs’ index futures positions as an optimistic indicator. A decrease studying signifies oversold situations available in the market, opening up the potential for a market rebound led by squaring up these bearish bets.”Traditionally now we have seen that when the FIIs’ long-short ratio comes within the vary of 10-15%, the positions are seen as short-heavy and the room to create recent brief positions by them reduces,” mentioned Ruchit Jain, vp at Motilal Oswal Monetary Providers. “Additionally, contemplating that we’d see third-quarter company earnings beginning this week, we anticipate FIIs to cowl a few of their brief positions within the close to time period.”This was nearer to 2024’s lows of 12.7% on June 4, which was seen in the beginning of June 2024 through the once-in-five-year mega occasion of the Lok Sabha election outcomes, mentioned Rajesh Palviya, head of technical and derivatives analysis at Axis Securities.
Nifty is up 1.1% since January 1.
“As per the information, the probabilities of the ratio testing decrease ranges appear feeble within the absence of any important occasion. Nonetheless, as the present market sentiment is cautious, the ratio will seemingly stay 12-15% on the decrease aspect and 40-45% on the upper aspect,” mentioned Palviya.
He mentioned excessive ranges could also be examined on both aspect throughout two essential occasions: the beginning of the Trump administration and the Union finances, which is able to, perhaps, set the tone for a sustained market pattern.
Technical indicators are additionally flashing some bullish indicators. “Now, the Nifty is forming a help close to its 200-day exponential transferring common (EMA), international markets have rallied increased on Friday, and the broader market has seen a optimistic momentum in the previous couple of periods,” mentioned Jain. He sees a rebound towards 24,500-24,600 with the 200-day EMA at 23,700 seen as rapid help.
The client-side – together with retail and excessive net-worth buyers – remained bullish with 462,000 lengthy contracts in opposition to 210,000 brief index futures.
Palviya mentioned there was a protracted buildup within the Nifty final week, with a worth achieve of 100 factors and an open curiosity addition of 1.20 million shares. “This up transfer will seemingly proceed within the coming week, primarily led by Banking Financials and FMCG shares whereas some motion could also be seen in Pharma and IT,” he mentioned.
Not Out of the Woods But
Some analysts are in no hurry to conclude {that a} sharp bounce-back is within the offing. “The market gave a pointy restoration on the weekly expiry session as if there is no such thing as a tomorrow. However that is merely an expiry issue. Or has the tide actually turned for the pre-budget rally? Time will inform,” mentioned Sameet Chavan, head of analysis, technical and derivatives, at Angel One.
“We advise merchants to not get carried away with in-between reliefs and may ideally keep away from leveraged positions,” added Chavan. “This view will get negated if Nifty breaks past the sturdy wall of 24,500-24,800. Then markets will surely gear up for the much-awaited pre-budget rally.”
