Bulls dominate October series as FPIs unwind shorts, setting the stage for a bullish November expiry

Nifty outlook for November expiry

October derivatives series witnessed a strong bull run, with Nifty and Nifty Bank surging 5.38 percent and 6.55 percent, driven by aggressive short covering from FPIs and pros. Despite lower rollovers, selective long carryovers hint at sustained optimism. India VIX stayed muted at 11.95, masking undercurrents of nervousness.

FPIs’ net shorts fell sharply to 92,116 contracts, with cash inflows of Rs 10,040 crore signaling returning confidence. Technically, the index maintains a higher-high structure above key EMAs, keeping the trend bullish. A breakout above 26,100 could spark a short-covering rally toward 26,700, while 25,500 remains the crucial make-or-break zone.

October Series Recap

The October derivatives series unfolded as a relatively low-volatility yet headline-driven phase, where bears struggled to gain control and eventually found themselves trapped in a wave of short covering. Both Nifty and Nifty Bank displayed strong bullish momentum, posting robust expiry-to-expiry gains of 5.38 percent and 6.55 percent, respectively. The rally was largely propelled by aggressive short unwinding from FPIs and proprietary traders, underscoring firm undercurrent strength.

Every intraday dip or pullback was swiftly bought into, reflecting persistent accumulation and leaving short sellers on the defensive.

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Dhupesh Dhameja

Derivatives Analyst|Samco Securities

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Nifty futures rollovers stood at 75.79 percent, notably below September’s 82.60 percent, and also lower than the three- and six-month averages of 80.74 percent and 79.40 percent, respectively. However, a rollover cost of 0.64 percent (Rs 164) indicates that selective long positions were carried forward — likely by strong hands anticipating further upside. Despite a marginal decline in rollover participation, the data suggest a constructive undertone for the November series.

November Series Preview

The November series began with a sharp reduction in open interest (OI) — declining to 1.51 crore shares from 1.82 crore in October. This contraction highlights that the recent upmove was largely driven by short covering rather than fresh long additions, adding a cautiously positive tone to the market setup.

While optimism persists, traders remain guarded amid global uncertainties and a spate of news-sensitive triggers. The near-term outlook points to a bullish-to-sideways trajectory, where dips continue to offer buying opportunities given the underlying technical strength in the indices.

Volatility Watch

India VIX remained subdued for the third consecutive month, ending October at 11.95 — comfortably within the neutral 10–13 range. Despite a robust rise in the index, the VIX inched up nearly 8 percent during the final week, suggesting a subtle rise in nervousness beneath the surface.

Global headwinds — including lingering trade tensions, dollar firmness, elevated bond yields, and global growth concerns — continue to simmer in the background. Such low volatility phases often precede sharp spikes, indicating traders should view the current calm as potential complacency and maintain prudent risk management.

FPI Flows – Shorts at Multi-Year Extremes

Foreign Portfolio Investors (FPIs) stayed net bearish for the fifth consecutive series, though a notable portion of their short exposure was squared off during October. This short covering provided crucial support to the indices, even as FPIs refrained from building meaningful long exposure, indicating lingering caution.

Net short positions declined sharply to 92,116 contracts, from 1,70,000 in the prior series. Interestingly, after three months of selling, the cash market recorded fresh FPI inflows worth Rs 10,040 crore, signaling early signs of confidence returning.

The long-short ratio improved to 19.51 percent by the end of the series, up from 5.98 percent at the start — a multi-year low. This shift, though largely short-covering-led, reflects a gradual easing of bearish sentiment, even as FPIs remain hesitant to turn fully bullish.

Options Market Radar

Options data depicts a mildly optimistic undertone, with Put writers exhibiting confidence at key in-the-money strikes. On the higher side, heavy Call writing at 26,000 and 26,200 has established it as a firm resistance, while strong Put writing around 25,800 underscores a solid support base — with 25,500 emerging as a critical floor.

The setup remains binary:
• A decisive breakout above 26,100 could trigger sharp short covering, pushing the index toward 26,500–26,700.
• Dips near 25,700–25,500 may attract fresh accumulation.
• A close below 25,450 would warrant caution, potentially signalling weakness in the ongoing uptrend.

Thus, the 25,500–26,000 zone remains the decisive trading range, and a break on either side will provide directional clarity for the coming sessions.

Technical Outlook – Strength Intact, Bias Positive

Technically, Nifty continues to display remarkable resilience after bottoming out near 24,600, with a well-defined higher-high, higher-low structure intact. Significant short covering was observed throughout the October series, with the broader time frame chart registering a decisive breakout that reignited bullish sentiment. The index hovered near its four-month highs, exhibiting strong upward momentum, as not a single week in the October series closed in the red — marking its strongest monthly gain in the past seven months.

Currently, the index hovers near the 25,500–25,600 breakout zone, a make-or-break support area. As long as this zone holds, any dip is likely to be swiftly bought. The index’s price action remains comfortably above the 10-, 20-, and 50-day EMAs, affirming robust bullish momentum and a healthy underlying trend.

Strategy Playbook – Buy Dips, Stay Tactical

As long as the Nifty sustains above the 25,500–25,600 zone, the bias remains constructively bullish. Traders should adopt a buy-on-dips strategy, focusing on accumulation near supports.

A decisive close above 26,100 could force bears into aggressive unwinding, potentially extending the rally toward 26,500–26,800. Conversely, a breakdown below 25,500 would invalidate the bullish setup, paving the way for a slide toward 25,000 or lower.

For now, traders should remain tactical and disciplined, ready to pivot quickly if key supports break, while staying aligned with the prevailing upside momentum.

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