How Nifty, Bank Nifty are set up ahead of RBI policy today; what FIIs, DIIs bought or sold in derivatives market

The long-short ratio for FIIs in index futures stands at 43.36 percent, reflecting a net selling position of 40,271 index futures.

With the Reserve Bank of India (RBI) set to announce its monetary policy today, Indian markets are showing signs of optimism with a hint of caution, as shown by positive futures and options data. The Nifty index has closed above the crucial psychological level of 25,000, while the Bank Nifty is indicating limited downside potential.

Nifty and Bank Nifty outlook

The NSE Nifty 50 index faces immediate resistance in the range of 25,150 to 25,170, said Sudeep Shah, Head of Derivatives Research at SBI Securities. A sustained move above 25,170 could trigger a rally towards the 20-day EMA at 25,395. On the downside, support has shifted higher to the 24,760-24,740 range. Should the index slip below 24,740, it may test the 24,500 level in the short term, he added.

Bank Nifty chart patterns also suggest a potential upward move. The immediate resistance is seen between 51,500 and 51,600, said Sudeep Shah, adding that a sustained move above 51,600 may lead to gains up to 52,000. Immediate support lies in the 50,600-50,500 range, with a drop below 50,500 potentially leading to a decline towards 50,100.

Futures and Options data shows long build up

The derivatives data shows a bullish sentiment, as October futures for Nifty surged by 0.58 percent, reflecting an overall long build-up. Specifically, 16 stocks in the Nifty index saw long positions, while 16 stocks experienced a short covering rally. The Put-Call Ratio (PCR) for the weekly Nifty options series is at 0.55, and the October monthly series PCR stands at 1.04, said Shah.

For the Bank Nifty, October futures increased by 0.74 percent, showing a potential short covering rally. Notably, substantial call open interest is present at the 51,500 and 52,000 strikes, while the put side has significant open interest at 51,000. This activity suggests that traders are positioning for potential upward movement in both indices.

What key sectors data shows

Sectorally, the Nifty Auto index has found support near its upward-sloping trendline and is expected to outperform in the short term, said Shah. The Nifty IT index has been trading within a narrow range, with the potential for a sharp rally if it sustains above 42,700. Additionally, Nifty Pharma and Healthcare sectors are anticipated to perform well in the upcoming sessions, aligning with the overall positive sentiment in the market, he added.

FIIs and DIIs activity in Indian markets

Foreign institutional investors (FIIs) sold approximately Rs 5,729.6 crore worth of equities, while domestic institutional investors (DIIs) purchased around Rs 7,000.68 crore. The long-short ratio for FIIs in index futures stands at 43.36 percent, reflecting a net selling position of 40,271 index futures.

Market sentiment hinges on forward guidance by RBI

As markets await the RBI's policy announcement, the participants remain focussed on any hint of future guidance on potential changes in interest rates and liquidity measures. Analysts suggest that the RBI's forward guidance will be crucial for market direction, particularly in the context of global economic cues, including recent actions by the US Federal Reserve.