Nifty Approaching 23000: FII Short Spike and Sector Focus on Financials and Real Estate

The FII long-short ratio in the Index Future segment has dipped to 9.9, primarily due to a 14% rise in shorts on Friday, marking a 43% increase on a week-on-week basis. This surge in shorts indicates an extreme situation. However, a 6% rise in longs on Friday, though modest, suggests that some FIIs are taking contra positions, hinting at the possibility of a market reversal.

Nifty’s prospects appear promising as it approaches 23000, a Fibonacci projection mark that signals potential bearish exhaustion. This allows bulls to regroup and aim for a recovery move towards 23,600-23,900. If Nifty fails to rise above 23,000, it could trigger a downturn towards 22,000. However, despite the bearish momentum, the VIX rose by only 5% on Friday, indicating that traders are not yet in panic mode.

CNX Realty is currently experiencing a medium-term downtrend. The cyclical upmove from the 2020 lows peaked around 1,300-1,400 in 2023-24, followed by a clear trend reversal. Prices have broken below the rising cloud and key EMA bands, trading comfortably below important Fibonacci retracement levels. This confirms a significant transition into a medium-term downtrend.

On the medium-term timeframe, the index is consolidating near 790, below the 200-DMA and the earlier support band of 820-850, now a resistance zone. Momentum indicators, such as the RSI and MACD, continue to reflect underlying weakness. Immediate support is located in the 740-720 zone. A convincing breakdown below this region could accelerate declines towards the 680-650 area. Any recovery attempts are likely to face selling pressure near 850, with stronger resistance at 900-950.

Derivative positioning further validates the weak technical setup, with 67% of stock futures recording short build-up or long unwinding on Friday. This bearish positioning is consistent across nearly all stock futures on a weekly basis.

CNX Financials, on the long-term chart, has been trading within a broader rising channel since 2022, reflecting a sustained uptrend. However, recent price action near the upper boundary indicates a loss of upward momentum. The index has broken below the short-term rising trendline and key supports, signaling a shift towards a corrective or consolidation phase.

On the medium-term timeframe, the index is around 25,100, trading below the 200-DMA and the earlier support zone of 26,500-27,000, now a resistance band. Momentum indicators, such as the RSI and MACD, continue to weaken. Immediate support is in the 24,700-24,500 zone, coinciding with the 61.8% Fibonacci retracement. A sustained breakdown below this area could accelerate the corrective move towards 24,000-24,650. Any recovery attempts are likely to face selling pressure near 26,000, with stronger resistance at 26,200-26,300.

Derivative positioning reinforces the negative sentiment, with 90% of stock futures registering short build-up or long unwinding on Friday. This bearish bias has remained consistent on a week-on-week basis, indicating sustained risk aversion and limited appetite for long exposure.

In summary, while the market shows signs of potential bearish exhaustion, the technical setup for CNX Realty and CNX Financials suggests a continued corrective phase. Traders and investors should remain cautious and monitor key support and resistance levels for any signs of a trend reversal.