Analysis of Nifty 50 Probable Movemen mots and Critical Levels Based on Open Interest Data
This paper examines the probable short-term movements of the Nifty 50 index and identifies critical support and resistance levels using the provided open interest (OI) data from May 2025 to September 10, 2025. The analysis incorporates statistical correlations, trend observations, Granger causality test results, and a Vector Autoregression (VAR) forecast. Key findings indicate a mixed sentiment with recent OI changes suggesting potential bullish covering of shorts, contrasted by a slight downward VAR point forecast to 24,958 from the September 10 close of 24,973. Critical levels are derived from historical price action and OI trends, with support near 24,500 and resistance around 25,000-25,100.
Vision
Open interest data in futures and options markets provides valuable insights into market participant sentiment, particularly from institutional players like Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs). Net OI positions can signal bullish or bearish biases: negative net OI often reflects short positions (bearish), while positive changes indicate covering or long builds (bullish). Aggregate cumulative OI, daily variations, and cash flows further contextualize potential index movements.
This analysis uses a dataset spanning 74 trading days, including net OI for futures and options, cumulative totals, daily variations, and closing prices. Granger causality tests confirm that OI data predicts Nifty movements at lag 2 (p-value = 0.042), supporting its use for forecasting. A VAR model provides a point forecast, while correlations and recent trends inform probable directions. Critical levels are inferred from price history and OI accumulations, as high OI strikes typically act as support (puts) or resistance (calls).
Data Description
The dataset includes daily entries from May 28, 2025, to September 10, 2025, with variables such as:
Net OI for DII, FII, and proprietary (Pro) traders in index futures and options.
Cumulative net OI for futures and options.
Daily variations in cumulative futures and options OI.
Total future-option cumulative OI.
Nifty 50 and Nifty Bank closing prices.
FII and DII cash flows in INR crores.
Descriptive statistics reveal:
Mean Nifty 50 close: approximately 24,970 (std. dev. ~317).
FII futures net OI: consistently negative (mean -133,000), indicating persistent short bias.
Cumulative futures OI net: mean -95,000 (mostly negative).
Cumulative options OI net: mean -220,000 (highly variable, std. dev. ~230,000).
The data shows Nifty 50 ranging from a low of 24,426 (August 29) to a high of 25,641 (June 27), with recent values stabilizing around 24,700-24,900 in early September.
Granger causality results (74 observations, end date September 10, 2025):
ADF p-value (predictor): 5.32e-17 (stationary).
ADF p-value (target, Nifty close): 0.182 (non-stationary, but differencing implied in VAR).
Selected lag (AIC): 2.
Granger p-values: lag 1 = 0.093, lag 2 = 0.042 (significant at 5% level).
SSR F-test p-value (lag 2): 0.042.
VAR forecast (1-step ahead, assumed for September 11):
Point: 24,958.39.
Lower bound: 24,581.45.
Upper bound: 25,335.33.
Analysis
Correlations and Trends
Correlations with Nifty 50 closing price highlight key relationships:
Cumulative futures OI net: +0.70 (strong positive; less negative OI correlates with higher closes).
FII futures net OI: +0.65 (FII short covering supports rallies).
FII options net OI: +0.52.
Cumulative options OI net: +0.49.
DII cash flows: -0.51 (negative, suggesting DII buying often occurs during dips).
FII cash flows: +0.32 (modest positive).
Over the dataset, Nifty closes are higher when cumulative OI nets are less negative, implying reduced short pressure. Recent trends (last 10 days, August 28 to September 10):
FII futures net OI: Improved from -191,415 (September 5) to -186,140 (September 10), a reduction of ~5,275 shorts (bullish signal).
Cumulative futures OI net: From -133,048 (September 8) to -126,631 (September 10), less negative.
Daily futures variation: Positive +5,739 on September 10.
Daily options variation: Positive +15,931 on September 10.
Total future-option cumulative OI: -493,376 (improving from -553,144 on September 8).
FII cash: Minor selling (-115 Cr on September 10), but DII buying (+5,004 Cr).
This suggests short covering and potential long builds, countering the bearish net positions. However, persistently negative FII OI indicates caution.
Granger Causality and VAR Forecast
The significant Granger p-value at lag 2 confirms OI data precedes Nifty movements, allowing predictive use. The VAR model, likely fitted on OI predictors and Nifty as target, forecasts a slight decline to 24,958 for September 11 (from 24,973), within a wide confidence interval (±~377 points). This implies high uncertainty, with possible upside to 25,335 or downside to 24,581.
Probable Movements
Based on recent OI improvements (less negative cumulatives and positive variations), the short-term bias leans mildly bullish, potentially targeting 25,000-25,100 if short covering continues. However, the VAR point forecast suggests a probable pullback to ~24,950-24,960, aligning with ongoing FII short dominance. Overall, expect sideways consolidation around 24,900-25,000, with volatility if cash flows shift. The wide VAR bounds indicate a 68% confidence range encompassing recent highs/lows, supporting range-bound trading unless OI nets turn positive.
Critical Levels
Critical levels are derived from recent price action and OI implications:
Support Levels: High put OI or cumulative build-ups often signal support. From data, recent lows at 24,426 (August 29) and negative OI trends suggest strong support at 24,500 (psychological round number, near August lows). Secondary support at 24,400 if breached.
Resistance Levels: High call OI acts as resistance. Recent highs at 25,083 (August 21) and stabilizing OI indicate resistance at 25,000 (round number) and 25,100 (near July highs). Breakthrough could target 25,200-25,300 if OI positives accelerate.
These align with general market observations where high OI concentrations create barriers.
Conclusion
The OI data reveals bearish undertones from negative FII positions, tempered by recent covering and positive variations, suggesting probable consolidation with a slight downward tilt per VAR forecast. Traders should monitor FII OI for shifts, with critical levels at 24,500 (support) and 25,000 (resistance) guiding strategies. Future work could incorporate strike-specific OI for refined levels.
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.
