F&O Tracker: Momentum fades but supports hold for Nifty and Nifty Bank futures

Nifty 50 (24,207) slipped 0.3 per cent over the past week, whereas Nifty Bank (58,046) edged up 0.2 per cent. The muted performance reflects a loss of momentum after the recovery seen over the preceding weeks. Renewed tensions between the US and Iran also weighed on sentiment as the earlier ceasefire came under renewed strain.

FIIs (Foreign Institutional Investors) continued to maintain a bearish stance in index futures. Their net short position increased 2 per cent over the week to 2.55 lakh contracts.

However, net short positions in index call options declined 6 per cent to 2.19 lakh contracts, while net long positions in index puts remained broadly unchanged at 4.79 lakh contracts. Thus, institutional positioning remains cautious, although bearish exposure in calls has moderated.

The broader positioning weakened further. Combined FII-retail net short positions on index futures increased 9 per cent from 78,070 contracts to 85,080 contracts. Net short positions in call options rose 24 per cent to 1.80 lakh contracts, indicating greater attempts to cap the upside. Net put shorts also increased 11 per cent to 1.51 lakh contracts, suggesting that traders continue to expect support at lower levels.

Overall, the derivatives data points to consolidation rather than an outright bearish reversal. Nifty appears relatively weaker after failing to sustain momentum above key resistance levels, whereas Bank Nifty continues to hold above important supports. 

Therefore, the near-term direction is likely to depend on whether the indices break out of their prevailing ranges.

Nifty futures (Jul) (24,242) remained volatile last week. After advancing in the early part of the week, the contract witnessed a sharp decline mid-week before recovering towards the close. Despite the rebound, it ended the week 0.5 per cent lower.

As the contract declined, its open interest (OI) fell marginally by 2 per cent to 168 lakh contracts, indicating some long unwinding. While this does not signal a decisive bearish shift, it suggests that bullish momentum has moderated.

That said, the options segment continues to reflect a positive bias. The Put Call Ratio (PCR) of July options stood at 1.14 on Friday. A PCR above 1 indicates relatively higher put writing, which is generally considered a favourable sign.

Overall, the derivatives data suggests that the recent uptrend has lost momentum, although it is too early to classify the move as a bearish reversal.

From a chart perspective, the support at 23,900 proved resilient despite last week’s sell-off. In fact, the recovery in the latter half of the week emerged from this base. However, since the contract has slipped back below 24,300, the bulls will need to reclaim this level to regain momentum.

A breakout above 24,300 can revive the positive bias and potentially trigger a rally to 24,750. Note that 24,570 could act as an intermediate hurdle.

Conversely, if the contract breaks below 23,900, the outlook can turn bearish, opening the door for a decline to 23,600. A breach of 23,600 can accelerate the fall towards 23,250.

Overall, Nifty futures has slipped back into the 23,900-24,300 range. At this juncture, the direction of the next leg of the trend remains uncertain, although the broader price structure continues to exhibit a mildly positive bias.

Strategy: Since Nifty futures (Jul) slipped to an intra-week low of 23,842, the stop-loss at 23,900 on our recommended long position would have been triggered.

For fresh positions, wait for a breakout above 24,300 and then go long. Place stop-loss at 24,100 and book profits at 24,750.

Nifty Bank futures (Jul) (58,200) also witnessed a decline last week but staged a stronger recovery than Nifty futures, enabling it to end the week broadly flat.

The OI eased marginally from 22.2 lakh contracts to 21.8 lakh contracts. Given the negligible price change, this decline in OI does not offer any meaningful directional signal.

The PCR of July options improved from ...