Nifty 50 (23,767) and Nifty Bank (56,694) fell 2.3 per cent and 3.1 per cent, respectively, last week, reversing the recovery seen over the preceding weeks. The weakness was accompanied by a rise in overall futures open interest (OI), indicating that fresh short positions were added as the market declined.

Foreign Institutional Investors (FIIs) turned more bearish. Their net short position in index futures increased 25 per cent to 2.71 lakh contracts from 2.17 lakh contracts. Net short positions in index call options, too, surged to 2.59 lakh contracts from 69,411 contracts. At the same time, net long positions in index puts increased 35 per cent to 5.35 lakh contracts. Taken together, the positioning indicates a clear increase in bearish bets by FIIs.

The broader positioning also weakened. Combined FII-retail net short positions in index futures increased 34 per cent to 94,349 contracts from 70,562 contracts. However, net short positions in index call options declined 24 per cent to 2.14 lakh contracts. Meanwhile, net put shorts more than doubled to 1.68 lakh contracts from 72,873 contracts, suggesting that put sellers increased their bullish bets despite the market decline.

The futures data of the indices corroborates the bearish tilt. Cumulative futures OI in Nifty increased from 172 lakh contracts to 206 lakh contracts even as the index fell. Similarly, Nifty Bank’s cumulative futures OI rose from 24.4 lakh contracts to 30.8 lakh contracts amid a sharper decline.

Overall, the derivatives positioning has turned bearish. However, with both indices approaching important technical supports, the price action around these levels will determine whether the correction deepens.

Nifty futures (Aug) (23,875) declined last week and breached the key support at 24,000. Despite witnessing an intraday recovery on Friday, the contract failed to reclaim this level.

Substantiating the bearish view, the decline was accompanied by a sharp increase in OI. The OI of August futures nearly quadrupled to 81.9 lakh contracts over the past week, indicating considerable short build-up.

The options data, too, reflects weakness. The Put Call Ratio (PCR) of July and August options declined over the week to 0.83 and 1.05 respectively. The fall in PCR indicates relatively greater call writing (selling) compared to put writing, suggesting a bearish tilt among option traders.

Overall, the futures and options data gives Nifty futures a clear bearish inclination. That said, the bulls could see some relief, at least temporarily, as the chart shows an important support at 23,700.

If Nifty futures (Aug) slips below 23,700, the decline can extend to 23,350, a notable support. A breach of this level can drag the contract further down to 23,000.

Alternatively, if the contract recovers from the current level of 23,875, it will face resistance at 24,000. A breakout above this level can lift Nifty futures to 24,250, where the 21-day moving average coincides, making it another significant hurdle.

Overall, the derivatives positioning and the breach of 24,000 have weakened the outlook for Nifty futures (Aug). However, the bears still face one more challenge, which is the support at 23,700. A breakdown below this level can strengthen the bearish case.

Strategy: Short Nifty futures (Aug) only if it breaks below 23,700. Place an initial stop-loss at 23,850. When the contract falls below 23,450, revise the stop-loss to 23,600. Book profits at 23,350.

Nifty Bank futures (Aug) (57,087) declined through last week and slipped below the support at 57,200. Although the contract fell to a low of 56,400 on Friday, it recovered during the session and managed to close above the 57,000-mark.

Like Nifty futures, the derivatives data for Nifty Bank futures also indicates a bearish bias. As the August futures declined, its OI surged from 3.6 lakh contracts to 13.7 lakh contracts over the past week, indicating significant fresh short build-up.

The options data reinforces the bearish view. The PCR of both July and August options declined last week to around 0.80. The fall in PCR, driven by relatively greater call writing than put writing, suggests a bearish tilt among option traders.

Overall, the positioning in the futures and options segments points to a bearish outlook.

However, Nifty Bank futures (Aug) has an important support at 56,300. If the prevailing bearish sentiment leads to a breach of this level, the contract can extend the decline to 54,800. The next support below this level is at 54,000.

Alternatively, if August futures rebounds from the current level, it can face resistance at 58,200. The subsequent hurdle is at 59,000.

Broadly, the outlook remains bearish, but the next leg of the decline hinges on a breakdown below 56,300.

Strategy: Short Nifty Bank futures (Aug) if it breaks below 56,300. Place an initial stop-loss at 57,100. When the contract falls below 55,800, revise the stop-loss to 57,000. Book profits at 54,800.

Published on July 25, 2026