Market undertones remain weak despite Nifty snapping 6-week losing streak; fall toward 24,200–24,100 can't be ruled out

Nifty Outlook

Nifty halted its six-week losing streak but stayed trapped in a narrow range, lacking strong follow-through. Key breakout levels at 24,800 and 24,400 will dictate the next move.

With Foreign Portfolio Investors (FPIs) holding heavy shorts and sentiment cautious, the market remains vulnerable to volatility and sell-on-rise trades. However, the indication of radical changes in GST structure in the offing may provide much-needed relief to the market mood in the coming sessions.

Weekly Market Recap

Nifty index ended its six-week losing streak, but the rebound remained lacklustre as the benchmark stayed confined within last week’s range. A potential Bullish Harami candlestick pattern on the weekly chart signals early optimism, yet the index has failed to close above the prior week’s high for the seventh straight week.

A decisive close above 24,800, a critical resistance coinciding with the previous swing high, is needed to confirm the bullish reversal signal. Last week’s movement stayed restricted within well-defined boundaries, resulting in choppy yet directionless action. Despite favourable news, such as the lowest CPI print in recent months and record mutual fund inflows, the index’s reaction remained subdued. Traders are likely to position their trades on the news flows around the September meeting of the GST council.

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Dhupesh Dhameja

Derivatives Analyst|Samco Securities

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Currently, Nifty is oscillating within the 10–20 DEMA envelope of 24,620–24,740, reflecting its lack of directional conviction. The broader structure points to consolidation between 24,800 (resistance) and 24,400 (support), underscoring an ongoing tug-of-war between bulls and bears. A sustained breakout above 24,800 or breakdown below 24,400, levels that also mark last week’s high and low, will likely define the next trend.

Persistent supply pressure is visible near the 20-DEMA and 50-DEMA cluster at 24,700–24,800. A close above this zone could force Call writers to unwind, unleashing upward momentum. Conversely, a breach below 24,400 could trigger stop-loss hunting on long positions, accelerating declines towards 24,200, where the 200-DEMA is placed. The daily RSI hovers near 40, signalling the absence of a strong reversal cue. Overall, a sideways bias prevails, favouring range-bound strategies or patience until a decisive breakout.

Open Interest (OI) Trends

Nifty Futures OI eased slightly from 1.72 crore to 1.68 crore contracts, a drop of 4 lakh, alongside a 1.10% price gain. This mild OI contraction, paired with price recovery, suggests short covering rather than fresh buying. While oversold conditions prompted short unwinding, aggressive long accumulation was absent, a sign of tentative sentiment ahead.

FPI Activity

Foreign Portfolio Investors (FPIs) held their ground on the bearish side, with short positions exceeding 92% and the long-short ratio hovering between 8–8.45% throughout the week. This marks the fifth straight week in oversold territory without signs of reversal. FPIs continued to be net sellers for the second week of the August series, reinforcing a persistent “sell-on-rise” approach. Any minor rebounds are likely to be utilised for fresh short additions.

Options Data Insights

Derivatives positioning mirrors the technical setup, with heavy activity around the at-the-money 24,600 strike. The 24,700 strike has seen aggressive Call writing with 47,000 open interest (OI) contracts, establishing it as firm resistance. On the flip side, the 24,600 strike’s strong Put OI of 45,418 contracts provides near-term support. While Put writers are cautiously shifting to higher strikes, Call writers remain hesitant, reflecting guarded sentiment. The Put-Call Ratio (PCR) at 0.87 captures the fierce battle between buyers and sellers.

Outlook for the Week Ahead

Market undertones remain weak despite the recent pause in Nifty’s losing run. Bulls have yet to build strong positions, and profit-taking has emerged post the oversold bounce. The index continues to print lower highs and lows while trading under the 20- and 50-DEMA, a bearish structural sign.

Immediate support rests at 24,500, a psychological level backed by Put writing. On the upside, 24,700–24,800 remains a dense resistance pocket with significant Call OI. Only a convincing close above 24,800 could ignite meaningful short covering. Failure to hold 24,500 may invite aggressive short build-up, dragging the index towards 24,300–24,200.

With FPIs holding steadfast to heavy short positions and volatility elevated, rallies could easily turn into bull traps. The technical structure continues to support a “sell-on-rise” strategy, with the possibility of Nifty testing 24,200–24,100 in the near term.

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