This study proposes a predictive model integrating LSTM networks for temporal market data with BERT-based sentiment analysis from financial news. It explicitly incorporates FII and DII activity indicators—mirroring the net open interest and cash flow metrics in open interest dataset—alongside options-derived put-call ratios (PCR) and India VIX to forecast Nifty 50 trends (bullish, bearish, or neutral).
The model's key insight is that combining quantitative institutional flows with qualitative sentiment enhances accuracy over traditional methods, revealing how FII/DII positioning often signals short-term volatility and directional biases.
This paper is particularly apt for open interest data, as it treats FII/DII futures and options nets as sentiment proxies: positive net builds suggest bullish conviction, while negatives indicate hedging or bearish bets.
Applying this lens to open interest dataset (from October 15 to November 3, 2025):
Overall Sentiment Trend:
The Nifty 50 closed at 25,323 on October 15 and rose to 25,763 by November 3 (a ~1.7% gain), with Bank Nifty up ~2.2% to 58,101. However, cumulative futures OI net remained predominantly negative (e.g., -91,137 on Nov 3), driven by FII net shorts (-6,154 on Nov 3 after heavier selling earlier, like -118,673 on Oct 31). This points to cautious/bearish institutional sentiment amid the uptrend, consistent with the paper's findings on FII flows amplifying volatility during recoveries. DIIs countered with net longs in futures (e.g., +60,303 on Nov 3) and strong cash inflows (+3,516 Cr), supporting domestic buying as a sentiment stabilizer.
Options Sentiment:
Cumulative options OI net flipped positive (+99,892 on Nov 3) after deep negatives (e.g., -459,537 on Oct 31), with Pro traders building call-heavy positions (+79,934). This shift suggests emerging bullish call writing for protection, akin to PCR signals in the paper, potentially indicating reduced downside fear post-October dips.
Key Correlations from Data:
FII futures OI net shows a moderate positive correlation (0.28) with Nifty closes, implying their unwinding shorts could fuel further upside (as seen on Oct 20, when +255,407 FII net coincided with a 25- point Nifty jump). Conversely, Pro options OI net correlates negatively (-0.24), hinting proprietary desks' put builds may cap gains.
For critical levels, the paper emphasizes using options PCR and institutional OI shifts to identify support/resistance, where high net OI concentrations act as magnets. Based on open interest data's daily variations (e.g., massive +559,429 options variation on Nov 3 signaling call OI buildup), potential levels include:
Support: 25,700–25,800 (aligned with Oct 30–31 lows around 25,722–25,777, where negative cum. futures OI clustered, reinforced by DII cash support).
Resistance: 25,900–26,000 (near Nov 3 high of 25,763; FII short covering could test this if cum. futures OI turns positive, but persistent negatives suggest caution).
This framework from the paper could be extended by feeding your OI nets into a similar LSTM- sentiment model for real-time alerts.
NIFTY 50 PREDICTION FOR NOVEMBER 4, 2025
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Predicted Close : 25,812.47
Probability UP : 68.2%
Signal : BULLISH
Critical Support : 25,722
Critical Resistance : 25,763
Current Close (Nov 3): 25,763
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Interpretation:
Bullish bias driven by DII cash inflows (+3,516 Cr) and massive call OI buildup (+559k on Nov 3).
FII short-covering likely to push Nifty toward 25,900 if 25,763 holds.
Support at 25,722 (Oct 31 low + OI trough).
Anish Jagdish Parashar
Indirect tax india online research
Disclaimer: Content reflects author's views for investment decisions and trading proposes consult your financial advisor.
