By Vineet Kumar 
Nifty Outlook: A Critical Week Ahead for the Index
The Nifty index finds itself at a decisive moment, balancing precariously near its key support levels. The 200-day exponential moving average (DEMA) around 23,540 and a demand zone between 23,300-23,200 are acting as safety nets. These levels are reinforced by significant Put writing, reflecting some buyer confidence. However, the broader sentiment remains bearish, as last week’s 2.55% decline took the index below the critical 23,800 support level, closing at 23,533—its lowest in weeks.
Bearish Momentum Takes Center Stage
On the weekly chart, Nifty has now failed to close above its previous week’s high for seven straight weeks, reflecting persistent weakness. The index is also stuck below its 20-week EMA, with every attempt to recover thwarted by sellers swooping in at higher levels. This consistent selling pressure highlights the bearish grip on the market.
On the daily chart, the 200 DEMA at 23,540 has historically been a make-or-break point. Below this, the demand zone of 23,300-23,200 has offered reliable support in the past. But the price action remains discouraging, with the index struggling to cross its 10- and 20-day EMAs. Adding to the woes, the RSI has failed to stay above 50 since early October, signaling a lack of strong buying interest.
For instance, imagine trying to hold a beach ball underwater; eventually, it rebounds with force. But in Nifty’s case, the ball seems to have lost its bounce, weighed down by consistent selling at every attempt to rise.
Open Interest Trends: Shorts Dominate
Nifty futures open interest (OI) rose significantly last week—from 13.02 million shares to 14.37 million—marking a 1.35 million increase. This rise in OI, paired with the index’s sharp decline, signals a clear build-up of short positions.
Adding to the cautious mood, Foreign Portfolio Investors (FPIs) maintained a steady long-short ratio, with long positions at 23.83%, down slightly from 24.06% earlier in the week. While this is better than the 22.27% ratio at the start of November, the heavy increase in short positions highlights growing bearish sentiment.
Key Levels in the Options Chain
Option data reveals an immediate battleground for Nifty:
Call open interest: 24,000 strike has 1,79,200 contracts, signaling strong resistance.
Put open interest: 23,000 strike has 1,39,469 contracts, indicating solid support.
Active trading between the 23,600-23,900 Call range and 23,100-23,500 Put range highlights resistance near 24,000 and support around 23,000. The surge in Call writing between 23,600 and 24,000 reflects bearish sentiment, while declining Put OI suggests waning confidence in a rebound.
Outlook for the Week Ahead
Nifty is truly at a crossroads. Its 200 DEMA and the 23,300-23,200 demand zone are pivotal. If these levels hold, the index could stabilize, but resistance near 23,800-24,000 will make any recovery an uphill battle.
Bearish Scenario: If Nifty slips below 23,480, selling pressure could intensify, dragging it toward the next major support at 23,250. Think of it as a levee breaking; once water starts flooding in, it can be hard to stop.
Bullish Scenario: A sustained move above 24,000, on the other hand, would signal a trend reversal, potentially triggering short-covering and pushing the index toward 24,500. But until Nifty reclaims 24,000 decisively, the market will likely stick to a “sell-on-rise” strategy.
For example, traders might look to sell every time Nifty nears resistance at 23,800, just as someone would sell a house in a declining market before prices drop further.
Conclusion
This week, Nifty’s performance will depend on whether it holds its ground at the 23,300-23,200 demand zone or succumbs to the selling pressure. While buyers have shown some resilience at these levels, the broader trend remains negative unless the index can mount a decisive comeback above 24,000. Until then, the mantra for traders will likely be “sell the rally and protect the downside.”
