Probable Movement and Critical Levels for Nifty 50 as of September 12, 2025
Vision
This custom analysis expands on the Granger Causality test results, where the daily_index_cumulative_fututures_variation (futures OI variation) Granger-causes Nifty 50 closing prices with a minimum p-value of 0.0008, indicating that past changes in futures open interest (OI) provide predictive power for index movements. Combined with substantive short covering observed in the data—evidenced by a sharp positive shift in futures OI variation from 322 on September 11 to 4,012 on September 12, driven primarily by reduced net short positions from Foreign Institutional Investors (FIIs)—the setup suggests bullish momentum in the near term. This is supported by a weak but positive correlation (0.116) between futures OI variation and Nifty closes, implying that OI unwinding can amplify upward trends.
Drawing from empirical studies and real-time market insights, this report integrates technical analysis, historical precedents of FII short covering, and recent market data to forecast probable movements. As of September 12, 2025, Nifty closed at 25,114 (per provided data), up from 25,005 the prior day, aligning with broader market reports of a rally amid short covering. However, external factors like global cues (e.g., US rate expectations) and low trading volumes could temper gains.aef8c5 A Vector Autoregression (VAR) model, fitted on differenced series with optimal lags, forecasts a next close around 25,092 (from prior analysis), but incorporating short-covering dynamics adjusts this to a modestly higher range of 25,100–25,200 for September 15, assuming continued OI positivity.
1. Granger Causality and OI Variation Insights
The Granger test confirms that futures OI variations lead Nifty closes, with statistical significance (p < 0.001). This aligns with academic findings that OI changes, particularly in index futures, signal directional biases due to institutional positioning. In the dataset:
Recent OI variation trend: -2,412 (Sep 8) → 678 (Sep 9) → 5,739 (Sep 10) → 322 (Sep 11) → 4,012 (Sep 12), showing accelerating positive shifts indicative of short covering.
FII futures OI net improved from -182,800 (Sep 11) to -172,349 (Sep 12), reducing net shorts by ~10,451 contracts—a classic short-covering signal.
Correlation analysis: 0.116 between OI variation and closes, suggesting OI acts as a momentum amplifier rather than a sole driver.
Regression-based prediction: A simple linear model using historical OI variation yields ~24,942 for the next close, but this underestimates momentum; a VAR forecast (accounting for causality) points to ~25,092, with potential upside from ongoing covering.
This causality framework echoes studies on Indian markets, where OI and volume predict closing prices, especially during volatile periods.
2. Impact of Substantive Short Covering
Short covering by FIIs—unwinding of bearish bets—has historically propelled Nifty rallies. For instance:
In August 2025, Nifty surged nearly 250 points in a single session due to FII short covering amid oversold conditions and positive global cues.
Analysts note that heavy FII short exposure (lowest longs in 5 years as of July 2025) can create "short traps," leading to squeezes and upward momentum.
In October 2024, FIIs trimming bearish bets triggered short covering, boosting Nifty; similar patterns emerged in March 2025 with a massive rally.
Reddit discussions highlight that extreme FII shorts (e.g., in May 2024) often precede 1,000–2,000 point squeezes.
In the current context, FII cash inflows turned positive at +129 crores on September 12 (from -3,472 on Sep 11), reinforcing covering. If sustained, this could add 200–500 points, as seen in prior instances. However, studies show FII flows have limited long-term statistical impact on Nifty trends, emphasizing the need for domestic support (e.g., DII buys at +1,556 crores).
3. Technical and Market Context
As of September 12, 2025:
Nifty is in a rising medium-term channel, with positive bias above 25,000.
Intraday rally: Up over 500 points reported (though data shows ~109 net; likely intraday highs), driven by strong performers like Axis Bank (+4.5%), BEL (+9%).
Put-Call Ratio (PCR) indicates bullish sentiment with put writing at 25,000; breakout confirmation above 25,040.
Historical closes (Yahoo Finance): Sep 11 high ~25,037, aligning with data trends.
finance.yahoo.com
Sector shifts: Nifty 50 rebalancing (effective Sep 30) emphasizes auto, defense, and consumption, potentially attracting passive inflows.
Volumes: Low volumes noted, suggesting caution—rallies without conviction may falter.
Comparative returns: Since 1999, Nifty has outperformed S&P 500 on a $1,000 investment basis as of Sep 2025, underscoring resilience.
Astrological and sentiment notes from X suggest mixed vibes for Sep 15, with planetary alignments favoring change.
4. Probable Movement Scenarios
Bullish Case (Base Scenario, 60% Probability): Continued short covering propels Nifty higher. Target: 25,200–25,300 by mid-September, driven by OI positivity and global optimism (e.g., rate cuts). Elliott Wave analysis points to Wave 3 upside if above 25,255.
Bearish Case (30% Probability): If covering stalls (e.g., renewed FII selling), consolidation or pullback to 24,700–24,900. Trigger: Negative OI variation or weak volumes.
Neutral/Sideways (10% Probability): Range-bound around 25,000–25,100 if mixed flows persist.
Forecast for Sep 15: 25,100–25,200, adjusting VAR for short-covering momentum.
5. Critical Levels
Resistance:
Immediate: 25,120 (recent high).244613
Major: 25,255 (Elliott breakout), 25,300 (psychological).
Support:
Immediate: 25,000 (key psychological/put writing level).
Major: 24,870 (intraday support), 24,700 (40-week MA), 24,617 (Elliott downside).
Pivot: 25,040—breakout above confirms bullish trend.
6. Recommendations and Risks
Strategy: Accumulate longs on dips above 25,000; monitor OI for covering continuation. Index investors: Add units systematically (e.g., Nifty 50/Midcap 150).
Risks: FII outflows resuming (e.g., due to US tariffs), low volumes leading to traps, or macroeconomic shocks.a290cc2b39d4
Disclaimer: This is for educational purposes; not financial advice.
Anish Jagdish Parashar
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