Nifty ends September with heavy FPI shorts, high rollovers; October series opens on a cautious note

Nifty Outlook for October series

Nifty ended the September series with a muted 0.59 percent gain, as sellers dominated every rebound, leaving the structure weak. Futures rollovers stood at 82.60 percent with a cost of 0.72 percent, reflecting stretched bearish bets. FPIs extended shorts for a fourth series, with the long-short ratio plunging to 5.98 percent and equity outflows of Rs 35,301 crore. Options data pegs 25,000 as stiff resistance and 24,500 as critical support. Technically, the index is entrenched in lower-high, lower-low patterns, trading below key EMAs. Until Nifty reclaims 25,000, a sell-on-rise strategy prevails, though extreme short positions may trigger sharp short-covering rallies.

September series recap – Tug of war favours bears

The September derivatives series turned out to be a volatile, headline-driven affair where bulls never managed to seize control. Nifty eked out a marginal gain of 0.59 percent, yet the move lacked conviction as the index settled almost flat near its opening level. Each recovery attempt was swiftly cut short by relentless selling, keeping optimistic buyers on the back foot.

Nifty futures rollovers came in at 82.60 percent, just below August’s 83.63 percent, but still higher than the three- and six-month averages of 80.58 percent and 79.97 percent. A rollover cost of 0.72 percent (Rs 177) suggests traders carried forward bearish bets willingly at a premium. Historically, rollovers above 81 percent indicate a market stretched on one side—often paving the way for sharp reversals when sentiment flips.

October series – Strong start but fragile undertone

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Dhupesh Dhameja

Derivatives Analyst|Samco Securities

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The October series opened with a notable jump in open interest (OI) to 1.82 crore shares from 1.69 crore in September. This suggests the initiation of fresh long positions, lending some positivity to the new series. Yet, the mood remains cautious. Traders are treading lightly, wary of global uncertainties and the technical fragility of the index. For now, the set-up points toward a range-bound phase rather than a decisive trend.

Volatility watch – Calm before the storm

India VIX stayed muted for the third straight month, ending the September series at 11.076. While this sits comfortably in the neutral 10–13 band, the steady rise in the final week hints at undercurrents of nervousness.

Global worries—ranging from persistent FPI outflows, sticky dollar strength, and rising commodity prices to global slowdown fears—are simmering beneath the surface. Such low volatility often precedes sharp spikes, meaning traders should treat the current calm as deceptive complacency and keep risk controls tight.

FPI flows – Shorts at multi-year extremes

Foreign Portfolio Investors (FPIs) have stayed resolutely bearish for the fourth consecutive series. Even as the index witnessed spurts of short covering mid-series, FPIs refused to unwind, instead doubling down on bearish wagers by series-end.

Their net short positions rose to 1,76,000 contracts, up from 1,69,000, while equity outflows from the cash market touched a hefty Rs 35,301 crore. The long-short ratio collapsed to 5.98 percent, marking a multi-year low.

Such extreme positioning raises the possibility of an oversold market—ripe for a powerful short-covering rally. But without price confirmation and visible unwinding of shorts, any reversal may remain elusive.

Options market radar – 25,000 the battlefield

Options data reflects a tug-of-war between bulls and bears. On the upside, heavy Call writing at 24,800 and 25,000 has created stiff resistance zones. On the downside, strong Put writing at 24,500 highlights critical support, with 24,000 emerging as the ultimate floor.

The setup is binary:
• A breakout above 25,000 could unleash short covering toward 25,500–25,800.
• A breakdown below 24,500 could accelerate the sell-off toward 24,000.

This makes 25,000 the key battlefield for directional clarity.

Technical outlook – Weakness persists, reversal elusive

From a technical lens, Nifty remains entrenched in weakness after topping out at 25,448.95. While strong short covering at the start of the September series sparked hope, gains were unsustainable. By the final week, the index had erased 3 percent, marking nine consecutive negative closes—each day failing to surpass the prior session’s high.

The index now hovers precariously around the 24,600–24,500 make-or-break zone. A sustained breach could trigger a deeper correction. The broader structure of lower-highs and lower-lows, along with price action staying well below the 20-, 50-, and 100-day EMAs, confirms persistent bearishness.

That said, extreme FPI shorts could spark intermittent relief rallies, though these may face heavy supply near resistance zones.

Strategy playbook – Sell the rise, watch for traps

Until the index reclaims 24,800–25,000 with conviction, the undertone remains negative. Traders should continue to adopt a sell-on-rise approach, deploying shorts near resistance zones.

A decisive close above 25,050 could force bears into unwinding, setting off a short-covering rally toward 25,500–25,800. On the flip side, a breakdown below 24,500 may intensify selling pressure, opening doors to 24,000 and beyond.

For now, traders should stay tactical, nimble, and defensive—ready to flip stance if resistance is decisively broken, but otherwise aligned with the prevailing bearish momentum.

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