Analysis of Nifty 50 Probable movement as of September 1, 2025

 Analysis of Nifty 50 Probable Movement and Critical Levels Based on Open Interest Data as of September 1, 2025

Executive Summary

The Nifty 50 index closed at 24,625 on September 1, 2025, reflecting a modest recovery from the recent low of 24,426 on August 29, 2025. Analysis of participant-wise open interest (OI) data reveals a bearish tilt from Foreign Institutional Investors (FIIs), who maintain significant net short positions in both index futures (-172,547 contracts) and options (-248,053 net, indicating higher net puts). However, recent changes in cumulative OI suggest some unwinding of bearish bets, particularly in options, where the cumulative net for FIIs and Proprietaries (Pros) improved from -602,583 to -407,959. Domestic Institutional Investors (DIIs) remain net long in futures (+34,318), providing counterbalancing support amid FII cash outflows (-1,429 crores).

Correlations from historical data (May to September 2025) show a positive relationship between less negative cumulative futures OI and higher Nifty closes (correlation: 0.64), as well as between option OI (net calls minus net puts) and Nifty performance (correlation: 0.44). US market indices (Nasdaq, Dow Jones, and S&P 500) exhibited upward trends through August 2025, potentially supporting global risk appetite.

Probable movement: Mildly bullish in the short term, with potential for a rally toward 25,000, driven by option OI shifts and DII cash inflows (+4,344 crores). However, persistent FII shorts may limit gains, with downside risks if US markets correct. Critical levels include support at 24,400–24,500 and resistance at 24,800–25,000.

Vision

Open interest (OI) in equity derivatives serves as a key indicator of market sentiment and potential price movements. It represents the total number of outstanding contracts, with net positions (long minus short) highlighting participant biases. Positive net futures OI suggests bullish sentiment, while negative values indicate bearishness. For options, the net (call net minus put net) reflects expectations: negative values (more net puts) imply bearish hedging or speculation.

This report analyzes the Nifty 50's probable trajectory using the provided participant-wise OI data as of September 1, 2025, alongside historical OI trends from May to September 2025. We incorporate cash market flows, correlations, and US market performance for a holistic view. Critical levels are derived from recent price action and technical indicators like moving averages and range extremes.

Current Open Interest Positions

As of September 1, 2025:

Futures Index Net Positions:

DIIs: +34,318 (bullish, down slightly from +36,834 on August 29).

FIIs: -172,547 (strongly bearish, improved marginally from -175,195).

Pros: +8,783 (mildly bullish, up from +8,045).

Cumulative Futures OI (DII + FII + Pro): -129,446 (net short, less negative than -130,316 on August 29, indicating minor short covering).

Options Index Net Positions (Call Net - Put Net):

FIIs: -248,053 (bearish, more net puts).

Pros: -159,906 (bearish).

Cumulative Options OI (FII + Pro): -407,959 (bearish but significantly improved from -602,583 on August 29, suggesting reduced put dominance or call additions).

Total long contracts across all categories: 18,038,546 (matched by shorts). The shift in options OI (daily variation: +194,624) points to a reduction in bearish pressure, potentially from expiring contracts or position adjustments post-August volatility.

Cash market flows on September 1: FIIs sold -1,429 crores, while DIIs bought +4,344 crores, underscoring DIIs' role in stabilizing the index amid foreign outflows.

Historical OI Trends and Correlations

Historical data from May 22 to September 1, 2025 (approximately 70 sessions) reveals fluctuating sentiment:

Cumulative futures OI ranged from -150,040 (May 22) to -55,445 (July 1), averaging around -90,000. It has trended less negative recently, aligning with Nifty's recovery from 24,426 (August 29) to 24,625.

Cumulative options OI showed higher volatility, peaking at +250,661 (June 20) and bottoming at -629,913 (August 8). The recent uptick (from -602,583 to -407,959) coincides with a +199-point Nifty gain.

Daily variations: Futures OI changes were modest (+870 on September 1), while options saw a sharp positive shift (+194,624), hinting at bullish repositioning.

Key correlations (based on the dataset):

Cumulative futures OI and Nifty close: +0.64 (moderate positive; as net shorts decrease, prices rise, possibly due to short covering rallies).

Cumulative options OI and Nifty close: +0.44 (positive; less put dominance correlates with upward moves).

FII cash flows and Nifty close: +0.34 (positive; FII buying supports rallies).

DII cash flows and Nifty close: -0.56 (negative; DIIs often buy dips, acting as a buffer during corrections).

These correlations suggest OI shifts lead or coincide with price trends. For instance, in late July to early August, deepening negative options OI (-310,092 to -520,979) preceded a Nifty dip from 24,768 to 24,565. The recent reversal supports a potential rebound.

Influence of US Market Indices

US indices showed consistent gains from June to August 2025:

Nasdaq Composite: Rose from ~19,662 (June 12) to ~21,705 (August 28), a ~10% gain.

Dow Jones: Advanced from ~42,968 to ~45,637, up ~6%.

S&P 500: Climbed from ~6,045 to ~6,460, up ~7%.

This bullish trend reflects strong global risk sentiment, often spilling over to emerging markets like India. Nifty has historically exhibited a positive correlation with US indices (though not quantified here), particularly in tech-heavy sectors. With no signs of reversal in the provided US data through August 29, this supports a constructive backdrop for Nifty, barring any post-data developments.

Probable Movement

Based on the data:

Bullish Factors: Reduction in negative options OI indicates potential unwinding of bearish positions, possibly ahead of expiry or due to improved sentiment. DII futures longs and cash buying provide domestic support. Historical correlations suggest that less negative OI often precedes rallies. Nifty's recent close above 24,600 (up 0.8% from August 29) and positive US trends reinforce upside potential.

Bearish Factors: FIIs' persistent shorts in futures and options signal caution, with net selling in cash markets. If global risks (e.g., US rate hikes or geopolitical tensions) emerge, FII outflows could accelerate.

Net Outlook: Short-term bullish bias, with Nifty likely to test higher levels in the 24,800–25,000 range over the next 1–2 weeks. However, upside may be capped near 25,000 due to FII resistance. Downside risk to 24,400 if OI turns more bearish. Overall probability: 60% chance of upward movement (200–400 points), 40% consolidation or mild correction.

Critical Levels

Without strike-specific OI, levels are derived from price action, moving averages, and range analysis (last 20 sessions):

Support Levels:

Immediate: 24,500 (recent pivot and approximate 5-day MA at 24,646).

Strong: 24,400 (August 29 low; breach could target 24,000).

Resistance Levels:

Immediate: 24,800 (mid-August consolidation zone).

Strong: 25,000 (psychological; aligns with 10-day MA ~24,873 and recent high of 25,083 on August 21).

Extended: 25,200 (July 23 high of 25,219; major breakout level).

Other Technicals: 20-day MA ~24,800; recent 20-day high/low: 25,083 / 24,363. Volatility may increase near expiry, with OI changes as leading signals.

Conclusion

The Nifty 50 appears poised for modest gains in the near term, supported by easing bearish OI in options and DII inflows, amid a favorable US market environment. However, FII shorts pose a key risk, potentially leading to volatility. Traders should monitor daily OI variations and cash flows for confirmation. For positional strategies, consider long positions above 24,700 with stops below 24,400, targeting 25,000. This analysis is based solely on the provided data and assumes no major external shocks. Further real-time updates via market platforms are recommended.

Anish Jagdish Parashar 

Indirect tax india online research 

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