Nifty 50 Probable Movement

 

Nifty 50 Probable Movement and Critical Levels Based on Open Interest Data (as of July 21, 2025)

This analysis examines the probable movement of the Nifty 50 index and identifies critical support and resistance levels using open interest (OI) data from futures and options, along with participant-wise positioning (DII, FII, Pro) as of July 21, 2025. By integrating futures and options OI, daily variations, and index closing prices, we derive insights into market sentiment, potential price trends, and key technical levels for traders and investors.

1.The Nifty 50 index, a benchmark for the Indian equity market, is influenced by the positioning of key market participants—Domestic Institutional Investors (DIIs), Foreign Institutional Investors (FIIs), and proprietary traders (Pro). Open interest data from futures and options provides a window into market sentiment, potential price direction, and critical levels of support and resistance. This paper analyzes the participant-wise OI data as of July 21, 2025, alongside recent index movements, to forecast probable Nifty 50 trends and identify critical levels for the near term.

2. Data Overview

The provided dataset includes:

Futures and Options OI: Participant-wise net positions in futures and options (DII, FII, Pro) as of July 21, 2025.

Daily Variations: Changes in futures and options OI, reflecting shifts in market positioning.

Index Closing Prices: Nifty 50 and Nifty Bank closing prices, alongside global indices (Nasdaq, Dow Jones, S&P 500) for context.

Nifty 50 Closing Price: 25,090.7 (July 21, 2025).

Participant-wise OI (July 21, 2025):

DII: Net long in futures (+37,199 contracts), neutral in options (minimal activity).

FII: Net short in futures (-145,244 contracts) and options (-153,091 contracts).

Pro: Net long in futures (+12,224 contracts), net short in options (-33,716 contracts).

Options OI Distribution: High OI in calls at 25,500–26,000 and puts at 24,500–25,000, indicating key resistance and support zones.

3. Market Sentiment Analysis

The OI data reveals distinct participant behaviors:

FIIs: Heavy short positioning in both futures (-145,244 contracts) and options (-153,091 contracts) suggests bearish sentiment. FIIs have consistently increased short positions in futures over the past weeks (from -38,123 on June 30 to -145,244 on July 21), indicating a lack of confidence in near-term upside.

DIIs: Net long in futures (+37,199 contracts) with minimal options activity suggests a defensive stance, likely hedging against FII selling pressure.

Proprietary Traders: Mixed positioning with a net long in futures (+12,224 contracts) but short in options (-33,716 contracts), indicating selective bullish bets in futures but cautious hedging in options.

The cumulative futures OI (-95,821 contracts) and options OI (-186,807 contracts) reflect a bearish bias, driven predominantly by FII shorting. However, the Nifty 50 index has remained range-bound between 24,800–25,600 over the past month, suggesting a tug-of-war between bullish DIIs and bearish FIIs.

4. Technical Analysis and Critical Levels

Using OI data and recent price action, we identify critical support and resistance levels for the Nifty 50.

4.1 Support Levels

24,800–24,900: Significant put OI is observed at the 24,800 and 25,000 strike levels, indicating strong support. The Nifty 50 has tested this zone multiple times (e.g., June 18 closing at 24,812.05) and bounced, reinforcing its importance.

24,500: High put OI accumulation at 24,500 suggests a secondary support level. A break below 24,800 could lead to a quick move toward 24,500, where put writers are likely to defend the level.

24,200: A psychological and technical support level, coinciding with the 50-day moving average (approximated based on recent closings).

4.2 Resistance Levels

25,500–25,600: Heavy call OI at 25,500 and 26,000 strikes indicates strong resistance. The Nifty 50 peaked at 25,649 (June 26) but failed to sustain above 25,500, aligning with high call writing by FIIs and Pros.

25,800: A breakout above 25,600 could target 25,800, but low OI at this level suggests limited immediate upside potential.

26,000: A major psychological and OI-heavy resistance, where call writers dominate.

4.3 Options OI Insights

Call OI Concentration: Highest at 25,500 (3.67 million contracts) and 26,000 (3.5 million contracts), indicating strong resistance due to call writing by FIIs.

Put OI Concentration: Highest at 25,000 (3.46 million contracts) and 24,800 (3.2 million contracts), suggesting robust support from put writers.

Put-Call Ratio (PCR): The PCR for Nifty 50 options is approximately 0.94 (3.46 million puts / 3.67 million calls), indicating a slightly bearish sentiment but close to neutral, suggesting consolidation.

5. Probable Movement

Based on the OI data and recent price action, the Nifty 50 is likely to remain range-bound in the near term, with a slight bearish bias due to FII shorting. The probable scenarios are:

Consolidation (Base Case, 60% Probability):

Range: 24,800–25,500.

Rationale: High OI at 24,800 (puts) and 25,500 (calls) suggests a range-bound market. The Nifty 50 has oscillated within this range since mid-June, with neither bulls nor bears gaining decisive control.

Trigger: Continued FII shorting offset by DII buying, maintaining equilibrium.

Bearish Breakdown (25% Probability):

Target: 24,500–24,200.

Rationale: A break below 24,800, driven by sustained FII selling and global market weakness (e.g., Nasdaq correction from 20,974.18 on July 21), could push the index toward 24,500, where put OI is significant.

Trigger: Negative global cues or increased FII shorting in futures.

Bullish Breakout (15% Probability):

Target: 25,800–26,000.

Rationale: A breakout above 25,500, supported by short covering by FIIs or fresh DII buying, could target 25,800–26,000. However, heavy call OI at 26,000 makes a sustained move unlikely.

Trigger: Positive global market cues or reduced FII shorting.

6. Global Context

Global indices provide additional context:

Nasdaq Composite: Declined from 20,611.34 (July 9) to 20,974.18 (July 21), indicating tech sector weakness, which may pressure FII sentiment in India.

Dow Jones: Rose from 42,240.76 (July 8) to 44,323.07 (July 21), reflecting resilience in broader U.S. markets.

S&P 500: Increased from 6,225.52 (July 8) to 6,263.7 (July 16), suggesting mixed global signals.

The mixed performance of global indices, particularly Nasdaq’s weakness, aligns with FIIs’ bearish positioning in Nifty 50 futures and options, reinforcing the consolidation or bearish breakdown scenarios.

7. Recommendations

Traders:

Range-Bound Strategy: Sell 25,500 calls and 24,800 puts (iron condor) to capitalize on consolidation, targeting premium decay.

Bearish Strategy: Buy 24,800 puts if the Nifty 50 breaks below 24,800, targeting 24,500.

Bullish Strategy: Buy 25,500 calls on a breakout above 25,500, targeting 25,800, with a stop below 25,400.

Investors:

Accumulate quality stocks on dips toward 24,800–24,500, as strong put OI suggests limited downside.

Avoid aggressive long positions until a breakout above 25,500 is confirmed.

Risk Management:

Monitor FII futures OI for signs of increased shorting or short covering.

Watch global indices, particularly Nasdaq, for cues on FII sentiment.

Set stop-losses below 24,800 (bearish) or above 25,500 (bullish) to manage breakout risks.

8. Conclusion

The Nifty 50 is likely to consolidate between 24,800 and 25,500 in the near term, with a slight bearish bias due to heavy FII shorting in futures and options. Critical support lies at 24,800 and 24,500, while resistance is at 25,500 and 26,000. Traders should adopt range-bound strategies, while investors can accumulate on dips, supported by strong put OI. Monitoring FII positioning and global market trends will be crucial for anticipating breakouts or breakdowns.

9. Limitations

The analysis assumes static OI levels, but intraday shifts can alter sentiment.

Global macroeconomic events (e.g., U.S. Federal Reserve actions) are not factored in but could impact FII flows.

The dataset lacks detailed strike-wise OI for precise gamma exposure analysis.

10. References

National Stock Exchange (NSE) Open Interest Data, July 21, 2025.

Historical Nifty 50 and global index closing prices (June–July 2025).

Anish Jagdish Parashar 

Indirect tax india research 

Disclaimer Content reflects personal views of the author; for trading and investment purposes consult your financial advisor.