Investors Cover Shorts as FIIs Turn Bullish Ahead of State Election Results; 24,000 a Key Hurdle for Nifty
The stock market buzzed with activity on November 22 as investors scrambled to cover their short positions in anticipation of the Maharashtra and Jharkhand election results. This cautious optimism led to a significant unwinding of positions in the November derivatives series. The NSE Nifty saw 12.23 lakh shares being unwound, while Bank Nifty recorded a reduction of 1.35 lakh shares. This unwinding, coupled with a sharp rise in the indices, confirmed that traders were rushing to cover their shorts.
FIIs Turn Aggressive on Long Positions
Foreign Institutional Investors (FIIs) added to the bullish sentiment by significantly increasing their net long positions in the indices. The long-short ratio jumped to 31% from 25%—the largest single-day increase in November so far. This shift points to a more positive outlook among FIIs, even as markets remain cautious ahead of key political outcomes.
For Nifty, the 24,000 level emerged as a major resistance point, with substantial call writing seen at this strike price. On the downside, strong put writing at 23,500 suggests this level will act as a solid support zone.
Market Surges on Short Covering
The Indian share market staged a remarkable comeback, with the BSE Sensex rallying nearly 2,000 points and Nifty climbing back to 23,900. “This rebound was fueled by oversold conditions and a wave of short covering,” said Rajesh Palviya, Head of Technical and Derivatives at Axis Securities. He highlighted that Nifty’s resistance has now shifted higher to 24,300–24,500, while support levels are firmly in place at 23,500–23,300.
Similarly, Bank Nifty’s critical level is 51,000, with resistance zones at 51,500, 52,000, and 52,500. Support has now moved to 51,000, 50,500, and 50,000. However, Palviya warned that geopolitical surprises or unexpected election outcomes could derail this momentum.
Bullish Signals in the Options Market
The options market also painted a bullish picture. The put-call ratio (PCR) climbed to 1.15 from 0.85, reflecting growing confidence among traders. “For the first time in two months, we’re seeing notable put writing activity, especially at 23,500 and 23,700,” said Dhupesh Dhameja, Derivatives Analyst at SAMCO Securities. This indicates strong buying interest at these levels, further solidifying the support zone.
At the same time, the 24,000 strike recorded the highest concentration of call options—64.67 lakh contracts—highlighting significant resistance. “A decisive move above 24,000 could spark another wave of short covering, potentially pushing Nifty toward the next hurdle at 24,500,” Dhameja added.
The “max pain” level, which represents the strike price where options traders would face the highest losses at expiry, shifted to 23,700. This adjustment suggests limited downside in the short term. Dhameja recommended a “Buy on Dips” strategy as long as Nifty holds above 23,500.
Technical Indicators Align with Short Covering
The technical outlook also supports the ongoing rebound. Nifty managed to reclaim its 200-day simple moving average (DSMA), a key technical level closely watched by traders. According to Osho Krishan, Senior Analyst at Angel Broking, the 14-period Relative Strength Index (RSI) moved out of oversold territory, aligning with historical support near the 200 DSMA.
However, Krishan advised caution, citing the persistent formation of lower highs. “Until Nifty decisively breaks above 24,000, it’s wise to keep positions light,” he said. He pegged key support at 23,600–23,500 and immediate resistance at 24,000–24,050.
All Eyes on Election Results and Monthly Expiry
Looking ahead, the market’s next big test will come on November 27, when traders react to the Maharashtra and Jharkhand election results, along with the upcoming monthly F&O expiry.
“A BJP win in both states could boost sentiment, but the impact may be short-lived,” said Palviya. The real challenge for Nifty will be maintaining its momentum above 24,000. If this resistance is broken, the index could climb further, but without a breakout, the market may remain range-bound in the near term.
Investors are advised to tread cautiously, with a focus on key levels, as the market navigates this critical juncture.
