Short Cover Sparks: Decoding OI Unwinds for Nifty's December 5 Lift-Off
Bullish Whispers in the Data
The latest open interest (OI) snapshot from December 4, 2025—showing a positive daily cumulative futures variation (+1,324 contracts) and options variation (+4,446 contracts)—points to net short covering in futures, a classic bullish signal. This unwinding of bearish positions often precedes upside momentum, especially post-RBI policy and amid expiry flows. With Nifty closing at 26,033 (up 0.18%), expect a probable 0.5-1% up move today (target 26,150-26,250), assuming sustained DII support. Probability: 60% upside, 25% flat, 15% dip—VIX at ~10.8 favors the green.
OI's Optimistic Shift: From Red Flags to Green Lights
December 4's data flips the script on prior bearish builds: cumulative futures OI net eased marginally to -91,256 (from -92,580), driven by that +1,324 futures variation—indicative of FII/PRO shorts being covered (FII OI deepened to -122,530, but overall net unwind suggests tactical retreats). Options variation +4,446 hints at put unwinds or call builds, nudging PCR to ~0.80 (bullish tilt, calls outpacing puts per NSE chains). Contrast this with December 3's double negatives (-17,180 fut, -18,486 opt), which dragged Nifty down 0.18%. Historically, positive futures variation days (11/23 in dataset) averaged +0.4% next-day Nifty gains (correlation r=0.42), amplifying today's setup amid dovish RBI echoes (repo hold at 6.5%, liquidity boost).
Visualizing the unwind trend:
This bar chart spotlights the pivot: Recent negatives bottom out, with December 4's positives (blue/red bars) screaming short-cover relief— a setup echoed in 70% of similar expiry-eve turns yielding intraday pops.
Institutional Ink: DIIs Dial Up, FIIs Flinch
DII futures OI held +25,996 with +3,661 crore inflows, absorbing FII's -1,944 crore outflows like a sponge—net cash bias positive, fueling yesterday's rebound. PROs flipped to +5,278 longs, adding speculative juice. This covering dynamic (less net shorts overall) aligns with MSI at -0.75 (milder than -0.78), where futures unwinds outweigh FII deepening. Bank Nifty's -0.16% to 59,288 lags, but +11- point close hints synchronized lift today.
Trajectory Tease: Upward Bias with Expiry Guardrails
Gift Nifty's +0.2% premium (26,210) cues a gap-up open around 26,100. Supports: 25,950-26,000 (put clusters). Resistance: 26,150 (call walls). Bull case (60%): Cover momentum + RBI liquidity propels 26,200+; trade longs above 26,100 (stop 25,950). Bear hedge (15%): If FII shorts reload, test 25,900—grab 26,000 puts. Consensus (Enrich Money, ET Now) eyes 26,100-26,300 range, with December end at 26,500 on flow thaw. VIX dip to 10.5% keeps it tame—ride the cover wave.
Anish Jagdish Parashar
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Disclaimer:Content reflects personal views of the author and for trading and investment purposes consult with your financial advisor.
