Nifty’s 25,000 hurdle: Bulls see breakout, bears dig in for weekly expiry today
Bulls and bears slugged it out at the 25000 mark on Monday, a level the Nifty hasn't convincingly tested since the US-Iran war began in late February, when the Nifty traded at 25178.65. Analysts, though, remain bullish on a decisive break above 25000.
The tug-of-war followed a 13% recovery in the Nifty from its 52-week low of 22179.9 on 8 October to 25030.35 on Friday. Nearly 70% of the gains came in the first week of November.
Though markets were open for Muhurat trading on Sunday, cash volumes were tepid at ₹23,275 crore against average daily volume of over ₹1.2 trillion this month. The special session is, therefore, excluded from the analysis.
By noon on Monday, which coincides with the Nifty weekly expiry, the index traded one tenth of a percent down at 24965 .
Markets will remain closed on Tuesday for Diwali-Balipratipada.
On Monday, traders added 297,941 Nifty incremental contracts at the 25000 strike call expiring today, taking the total open position to 447,151 contracts. This compared with 56,492 incremental shares at the 25000 strike put, which had open positions of 162,707 contracts, per NSE data.
Higher sales of calls relative to puts indicates confidence of bears that markets won’t cross that level plus the premium paid and they would be able to pocket the premium or price of call options paid by buyers. Option sellers tend to be stronger hands than option buyers .
The higher addition of call contracts suggests that option sellers are betting the Nifty will not cross 25,000, allowing them to retain the premiums received from buyers. Option sellers are generally considered better-capitalized market participants than option buyers.
Rise from the lows
Almost 9% of the gain from the 52-week low on 8 October came in November through Friday, after a Democratic sweep of the US Congress in the midterm polls dragged oil prices down 16% to $98.32 a barrel over the same period on hopes of an end to the West Asia war, per investing.com
A potential moderation in the AI trade, with Democrats batting against the proliferation of data centres has led to foreign investors buying shares worth $4.06 billion in November through Thursday after selling $38.66 billion in the calendar year through October.
“As the Nifty has broken key resistances during its recovery from the 52-week low, I feel we should test the record high of 26373.20 hit in January by the end of 2026,” said DK Aggarwal , chairman & MD , SMC Capitals Ltd.
FPIs buy in cash, cover futures shorts
The gains have accrued not just by recent FPI cash buying, but also by a sharp covering of bearish positions in index futures (Nifty and Bank Nifty).
NSE data shows that FPIs covered cumulative index futures shorts by a whopping 140,337 contracts to 100,416 contracts in November through Friday.
“Alongside the cash buying this month, this short covering has enabled Nifty to retrace its major loss from the 52-week high (5 January) to the 52-week low (8 October) largely this month,” said Rohit Srivastava, founder of analytics firm IndiaCharts, who, like Aggarwal, believes Nifty will hit a fresh high by the year-end.
The levels referred to here are the ‘Fibonacci retracements’, which are used to identify a bullish or bearish trend.
One of the key levels was at 24772, representing a 61.8% retracement from the low of 8 October. The Nifty crossed this level on Friday.
This has raised hopes among market experts like Aggarwal and Srivastava that Nifty could breach 25475 this month.
However, some analysts remain cautious after the sharp rise this month.
“Even if the external macros led by crude improve, we have had drought across many states, which could result in surge in food inflation and cost of funds remaining elevated for corporates, which could impact the earnings trajectory and thus cap the upside,” said Sudhir Joshi, consultant, Khambatta Securities.