Analysis of Nifty 50 Probable Movements and Critical Levels

 

Analysis of Nifty 50 Probable Movements and Critical Levels: Insights from Open Interest Data, Granger Causality, and Key Economic Indicators

Vision

This paper examines the probable short-term movement of the Nifty 50 index as of September 15, 2025, leveraging provided open interest (OI) data, results from a Granger Causality test, and a Vector Autoregression (VAR) model forecast. Integrated with recent economic indicators such as low inflation, robust GDP growth, stable repo rates, a weakened rupee, strong manufacturing activity, and declining crude oil prices, the analysis suggests a mild downward correction in the immediate term, potentially testing support around 25,000–24,888, followed by upward momentum if macroeconomic conditions remain supportive. Critical levels include resistance at 25,683 and support at 24,409, derived from technical calculations on historical closings.

The Nifty 50 index, representing the top 50 companies on the National Stock Exchange of India (NSE), serves as a barometer for the Indian equity market. As of September 15, 2025, the index closed at 25,069 amid volatile trading influenced by domestic open interest positions in futures and options, foreign institutional investor (FII) flows, and broader economic factors. This analysis utilizes OI data spanning May 28 to September 15, 2025, to identify causal relationships via Granger Causality testing. It incorporates a VAR-based forecast and supplements with external economic indicators to provide a comprehensive view of probable index movements and key technical levels.

Open interest data, including net positions from domestic institutional investors (DIIs), FIIs, and proprietary traders (PROs), offers insights into market sentiment and potential price directions. Granger Causality helps determine if these variables predict Nifty closings, while economic indicators from reputable sources contextualize the forecast.

Data and Methodology

Dataset Description

The dataset comprises 73 daily observations from May 28 to September 15, 2025, including variables such as DII/FII/PRO future and option OI nets, cumulative OI, daily variations, Nifty 50 closings, Bank Nifty closings, and FII/DII cash flows. Dates were parsed chronologically, and series were differenced for stationarity to mitigate trends.

Granger Causality Test

Granger Causality was applied to differenced series using up to 5 lags. Significant predictors (p < 0.05) of Nifty 50 closing changes include:

DII future OI net (min p ≈ 6.71e-10)

FII future OI net (min p ≈ 5.38e-06)

Cumulative futures OI net (min p ≈ 0.00027)

FII option OI net (min p ≈ 0.0193)

Daily index cumulative futures variation (min p ≈ 0.00026)

DII cash in INR crores (min p ≈ 0.0402)

These indicate that institutional OI positions and cash flows provide predictive power beyond the index's own history.

Forecasting Model

A VAR model was fitted to differenced Nifty closings and the six significant features, using 5 lags. The one-step-ahead forecast yields a predicted closing of 25,025 for the next day, implying a slight decline from 25,069.

Technical Indicators

From Nifty closings:

50-day moving average (MA): 24,888.38

14-day Relative Strength Index (RSI): 53.73 (neutral, not overbought/oversold)

Pivot point: 25,023

Support 1: 24,409

Resistance 1: 25,683

Support 2: 23,749

Resistance 2: 26,297

These levels were computed using overall high (25,637 on June 30) and low (24,363 on August 8) closings for pivots.

Economic Context

India's economy exhibits strength as of September 2025, supporting potential Nifty resilience. August CPI inflation stood at 2.07%, up slightly from July's 1.55% but remaining  GDP growth for Q2 2025 accelerated to 7.8%, exceeding expectations and signaling robust expansion. The RBI held the repo rate at 5.50% in August, following a 50 bps cut in June to stimulate growth amid global uncertainties like U.S. tariffs. The USD/INR exchange rate hovered around 88.28, reflecting rupee depreciation that could pressure imports but boost exports. Manufacturing PMI reached 59.8 in August, its highest in over 17 years, indicating strong industrial activity.e11810 Crude oil prices (Brent) declined to around $66–67 per barrel, beneficial for India's oil-import-dependent economy.

These indicators suggest a favorable backdrop: low inflation allows policy flexibility, high growth and PMI bolster corporate earnings, stable rates encourage investment, and low oil reduces fiscal strain. However, rupee weakness and external risks (e.g., U.S. tariffs) may cap gains.

Analysis of Probable Movements and Critical Levels

The Granger test highlights FII and DII OI nets as key drivers, with recent data showing FII future OI net at -171,156 (bearish) and DII at 36,851 (bullish offset) on September 15. Cumulative option OI net at -406,715 indicates hedging, potentially signaling volatility. The VAR forecast of 25,025 aligns with a pivot at 25,023, suggesting consolidation or a pullback.

Probable movement: Short-term downside risk to test the 50-day MA at 24,888, driven by FII outflows (-1,268 crores on September 15) and neutral RSI. If breached, Support 1 at 24,409 becomes critical, near recent lows. Upside, breaking Resistance 1 at 25,683 could target 26,000+, supported by strong macros. Low oil and high PMI favor sectors like autos and manufacturing, potentially lifting Nifty if global sentiment improves. However, rupee depreciation may weigh on IT and pharma.

Critical levels for September 16 onward:

Immediate Support: 25,000 (psychological), 24,888 (50-MA)

Major Support: 24,409 (S1), 23,749 (S2)

Immediate Resistance: 25,200 (recent highs), 25,683 (R1)

Major Resistance: 26,297 (R2), 26,000 (round figure)

These align with analyst views of support around 24,800–25,000 and resistance at 25,150–25,200.

Conclusion

Based on OI-driven Granger Causality and VAR modeling, Nifty 50 faces a probable mild correction to 25,000–24,888, but positive economic indicators—low inflation (2.07%), strong GDP (7.8%), and PMI (59.8%)—suggest rebound potential. Monitor FII flows and global cues for confirmation. Investors should watch critical levels for entry/exit: buy on dips near support if macros hold; sell on rallies toward resistance amid volatility.

References

Ministry of Statistics and Programme Implementation (MoSPI) data on CPI and GDP.

Reserve Bank of India (RBI) monetary policy announcements.

Reuters and Bloomberg reports on economic indicators and market levels.

NSE historical data for technical computations.

Anish Jagdish Parashar 

Indirect tax india online research 

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