Nifty index declined sharply by 1.39 percent last week (ending May 9), leaving market participants on the edge, as bulls appeared to be running out of fuel. The consistent rejection from higher levels continues to reflect a nervous undertone, and the index finally broke its four-week winning streak, closing below last week’s low. A Bearish Engulfing candle pattern formed on the weekly chart signals a shift in momentum, suggesting that the recent rally might have hit the pause button.
Currently hovering near its 20-day EMA, the index is stationed at the make-or-break zone of 24,000. The previous support level of 24,200 has now turned into a stubborn resistance, pointing to the bulls' retreat from the battlefield. This technical alignment highlights a gloomy near-term view, as buying interest appears to be waning, and sellers are gradually gaining command of the narrative. Despite brief intraday recoveries, the index has failed to hold on to its gains, although it is still managing to respect its key support levels.
Aggressive positioning by both Call and Put writers indicates a standoff between bulls and bears. On the momentum front, the RSI (Relative Strength Index) on the daily timeframe is also showing loss of bullish strength, slipping below the 60 mark, a bearish sign. With the index balancing precariously between 24,000–23,800, a decisive breakdown below this zone could indicate that sellers are taking charge, and a wave of long unwinding might follow. As the index stands at a critical crossroads and geopolitical tensions escalate, coupled with the ongoing Q4 earnings season, investors' sentiment stays fragile and uncertain.
Open Interest (OI) Trends
Nifty Futures Open Interest (OI) dipped marginally from 12.93 million shares to 12.62 million shares, a slight decrease of 0.31 million shares over the week. When paired with the 1.39% decline in price, this subtle drop in OI suggests that short sellers are building positions slowly and strategically. The overall tone in the OI structure underscores a persistence of the bearish mood and reveals the market’s current struggle with pessimism.
FPI Activity
Foreign Portfolio Investors (FPIs) remained active buyers through the bulk of the week, building up notable long positions, although they trimmed some exposure on the final trading session. The FPI long-short ratio nudged higher from 47.37% to 47.71%, indicating a slight positive bias among institutional investors. As long as FPIs maintain buying interest, significant drawdowns may be limited. This behaviour points towards a consolidative mood, where sharp corrections are being absorbed, and markets may stay choppy.
Options Data Insights
Options chain analysis reveals concentrated Call OI at the 24,500 strike (64,542 contracts), while the highest Put OI rests at the 24,000 strike (90,291 contracts). Activity is dense between the 24,300–24,500 Call strikes and 24,000–23,800 Put strikes, highlighting immediate overhead pressure at 24,300 and strong support near 24,000. Robust Call writing and signs of the Put unwinding in the upper bands hint at bearish control. The Put-Call Ratio (PCR) declined to 0.82, underlining the tightening grip of bears. A decisive break below 24,000 could escalate downside pressure and may pull the index lower toward 23,500.
Outlook for the Week Ahead
The appearance of a Bearish Engulfing candle on the weekly chart sends a clear message - the bulls are stepping back, and the market is showing signs of fatigue. The index failed to sustain above key levels despite multiple efforts, and the rising India VIX only adds fuel to the uncertainty. Immediate support lies in the 24,000–23,800 zone, which has so far attracted notable Put writing and could offer some cushioning. However, the 24,300–24,500 band presents a tough ceiling, fortified by technical resistances and heavy call writing activity. A breakout above 24,200 might offer a short-lived relief rally up to 24,500.
But unless the index convincingly crosses the 24,500–24,800 barrier, traders may prefer to sell into strength. Conversely, a breakdown below 23,800 could accelerate the fall towards the critical zone of 23,500–23,200. With India VIX climbing toward 21, reflecting peak nervousness, and Open Interest still elevated, the market seems to be shifting out of bullish gear. Every uptick is being sold into, and volatility expectations suggest that traders are bracing for rough terrain ahead. Caution is the name of the game, and the broader sentiment leans toward defensive strategies and risk-off positioning.
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