The August series kicked off on a cautious note, following a weak July expiry where Nifty slipped 3.16% amid persistent selling. Derivatives data paints a bearish-to-neutral picture, rollovers dipped to 75.71%, FPI short positions surged to 1,37,660 contracts by the end of the July series, and the long-short ratio collapsed to a low of 9.59%. Despite a modest rise in open interest and subdued rollover cost, the absence of a strong buildup in either direction hints at a wait-and-watch approach. With India VIX still at its neutral zone, traders should brace for potential volatility spikes and position themselves for a range-bound-to-bearish phase.
July Series Recap
Nifty wrapped up the July series with a noticeable downturn, slipping 3.16% as selling pressure remained dominant throughout the month. Every minor rally was swiftly sold into, trapping optimistic buyers along the way. Nifty futures rollovers came in at 75.71%, easing from 79.54% in June and trailing behind the three- and six-month averages of 78.04% and 78.15%, respectively. This relatively eased rollover, paired with a modest rollover cost of 0.40% suggests traders were reluctant to carry forward their bearish bets at a premium, signalling a shift towards a cautious and wait-and-watch approach with a subdued bearish-to-neutral undertone.
August Series Begins
As the August series commenced, Nifty’s open interest (OI) ticked up slightly to 1.64 crore shares from 1.62 crore in the previous series. This mild increase in OI, coupled with a declining price action, suggests a cautious undertone — with no strong build-up in either fresh long or short positions. The tone for the new series remains subdued, with early signs pointing towards a bearish-to-range-bound phase as participants tread carefully amidst rising uncertainty.
Volatility Watch
India VIX remained largely muted through July, dropping from 12.59 to a seven-month low of 9.86 before inching up to 11.54 by the end of the series. Despite global macro headwinds, including trade tensions, economic slowdown concerns, and persistent FPI outflows, VIX continued to hover well below its psychological comfort zone of 13. This complacency may not last long, and traders should be on high alert for a possible spike in volatility. Amid the rising risks, prudent risk management becomes paramount to navigate the impending turbulence.
FPI Flows
Foreign Portfolio Investors (FPIs) maintained a bearish stance through July, steadily building substantial short positions, culminating in a net short tally of 1,37,660 contracts by the end of the series. The FPI long-short ratio nosedived from 37.92% at the start of the series to a multi-year low of 9.59%. Such extreme bearish positioning often signals an overextended market, with the possibility of a sharp rebound once short-covering is triggered. Historically, such deep oversold levels in FPI positioning tend to precede strong upward moves, but confirmation via price strength and early unwinding from FIIs will be key for any bullish reversal.
Options Market Radar
In the derivatives space, options data reveals a tightly contested battlefield. On the higher side, the 25,000 and 25,200 strike Calls are witnessing significant buildup, marking key resistance zones. Conversely, strong support is emerging at the 24,500 strike, with 24,000 serving as a more decisive support threshold. A convincing breakout above the 25,000 mark could ignite a swift short-covering rally, potentially propelling the index toward 25,500. On the flip side, a breach below 24,300 could intensify bearish momentum and drag the index lower, toward the 24,000 level.
Technical Outlook
From a technical standpoint, the Nifty index exhibited persistent selling pressure through July, breaching key supports and pushing resistance levels downward — underscoring a weak and volatile phase. On the monthly chart, Nifty printed a strong bearish candle, erasing the gains of the previous month. On the daily timeframe, the index is trading below its 50-day EMA, further confirming underlying weakness.
The 24,400–24,450 zone remains a crucial support band, supported by aggressive Put writing and strong demand. However, the prevailing lower-high, lower-low structure and broad-based weakness across heavyweight and midcap counters keep the downward pressure intact. A decisive breakdown below 24,400 could accelerate losses, pulling the index swiftly toward the 24,000 mark.
Strategy Playbook
Until the index decisively reclaims the 24,800–25,000 resistance zone, the bearish undertone is likely to persist. A sustained move above 25,050 could signal a reversal, triggering aggressive short-covering and opening the gates for a rally toward 25,500–25,800 or higher. In this context, traders are advised to adopt a defensive and disciplined strategy, staying alert to price behaviour around key support and resistance levels. Given the mixed cues and technical fragility, a break above resistance could spark momentum, while a breach of key supports could deepen the correction.
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