The uptrend in the benchmark indices is expected to continue based on the trends in the F&O market.
Foreign Portfolio Investors (FPIs) engaged in aggressive short covering in the index futures segment last week, which helped boost the indices. Despite this, 68 per cent of their positions still remain on the short side.
According to HDFC Securities, the ongoing short covering activity by FPIs is likely to support the market’s upward momentum in the coming days. The weekly chart shows a long bullish candle formation, indicating a positive bias with a higher high and a higher low compared to the previous week’s closing.
Axis Securities noted that the Weekly RSI and Stochastic indicators have turned positive from oversold levels, further strengthening the bullish outlook.
Nifty’s underlying trend remains positive, with the index surpassing the downward-sloping trend line. The immediate resistance level for Nifty is at the 200 EMA of 23,400, and breaking past this could push the markets towards the next resistance level of 23,800. The support level for Nifty has shifted higher to the 23,200-23,250 range.
Last week witnessed one of the best weekly gains in four years, with Nifty 50 posting a 4.3 per cent increase week-on-week. The broader markets outperformed the frontline indices as well. The intensity of Foreign Institutional Investor (FII) selling has decreased in recent days, supported by rebalancing-led flows.
Global macro indicators are largely supportive, with corrections seen in the dollar index, Brent crude oil prices, and US 10-year yields from their recent highs. Reports also suggest that the reciprocal tariffs set to be imposed by the US on major trading partners, including India, may be less widespread than initially expected.
Overall, the positive momentum in the F&O market and supportive global cues indicate a favorable outlook for Nifty in the near term.
