We have entered the new Samvat on a high, despite Muhurat trading day giving away some gains. Going into the auspicious day, the sustainability of the uptrend was in doubt, given the superlative returns of the previous week.
It was not a stretch to expect continued positivity, since Muhurat trading day as well as the week prior to it have been positive in all but two years since 2015.
The year so far has been unusual given the stark negative tone prevailing through the year, registering a YTD loss of 12.82 until October, with September alone registering over 6.06% cut, the largest decline since 2018. While the mood slowly changed by the end of October, FIIs’ return in both cash and futures market was a visible signal that the trend is changing.
FIIs continued to add index future longs through the week, but much more visible was the short covering that lent muscle to the Nifty’s uptrend. While FIIs’ index future long positions rose by 41% to the end week at 48,656 contracts, index future shorts reduced by 45% to 149072 contracts, pushing the long short ratio to 24.6, the highest since February this year.
The long position is still long way from what is usually seen during strong up trending periods, pointing to two possible scenarios. One, what we have seen so far has been a tactical positioning and a swing longer could follow. Or, since the long short ratio is still not far historical lows, significant short covering led rallies are yet to follow. We are not yet convinced about the latter outcome, fearing a mean reversion, as the doubling of the long short ratio unfolded in just two days.
FMCG Index builds a strong reversal setup
The Nifty FMCG Index is starting to show encouraging signs of a reversal. The falling wedge that has been in place since 2025 has narrowed considerably, and the index now looks close to a potential breakout. Last week’s bullish Marubozu candle on the weekly chart, together with the weekly MACD edging towards a bullish signal crossover, adds weight to the case for a structural recovery.
That said, the sharp rebound has left the daily setup a little stretched, so it wouldn’t be surprising to see some profit booking early next week before the recovery picks up again. If the breakout is sustained, the index could first aim for 47500 and then move on to the 50000-50700 zone. On the downside, the 43400 level remains a key support zone.
Derivative positioning also remains constructive. Around 60% of near-OTM puts are seeing short additions, and nearly 55% of near-OTM calls are seeing long build-up, which is a reassuring sign for the bulls.
Among the heavyweights, ITC, Nestle India, Varun Beverages and Hindustan Unilever look well placed to support the recovery, even if some near-term volatility lingers. Dabur and Marico, on the other hand, continue to look relatively weak and are worth watching closely.
Metal Index shows renewed buying interest
The Nifty Metal Index is showing encouraging signs of a reversal after bouncing back from its recent correction. A weekly bullish Marubozu candle and a close above the weekly middle Bollinger Band point to renewed buying interest. Momentum is improving as well: the weekly MACD histogram is printing exhaustion candles and the RSI has moved above its average, which suggests that bearish momentum is steadily fading.
Strength in individual stocks adds further conviction to the recovery, with Jindal Steel, SAIL, Hindustan Copper, Hindalco and Tata Steel all well positioned to lead the index higher from here.
That said, short-term momentum indicators are nearing their upper extremes after the sharp rebound, so the index may consolidate or see some profit booking along the way. Such dips are likely to attract fresh buying, provided the heavyweight stocks continue to hold firm.
From here, the index could gradually make its way towards the 13,400-13,700 resistance zone, while 11,850 remains the crucial support level to keep the reversal structure intact.
The author is Anand James, Chief Market Strategist at Geojit Investments.
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