Analysts have warned traders to adopt a ‘wait and watch’ approach as derivatives data signals potential market volatility and indecision.
Futures and options (F&O) data show a decline in investor confidence after a weak July expiry.
In July, Foreign Portfolio Investors (FPIs) increased their short positions to 137,660 contracts.
The Nifty dropped 3.31% in the last 30 days, reflecting negative sentiment.
Rollover Data Shows Decreased Confidence
The rollover rate of F&O contracts for August declined to 75.71% compared to 79.54% in June. Analysts said the lower rollover cost and reduced participation highlight a lack of conviction among traders.
Open interest in Nifty futures rose marginally from 1.62 crore shares in July to 1.64 crore in August. However, the subdued price movements indicated that investors avoided taking strong bullish or bearish positions.
Technical analysts noted that the Nifty formed a bearish candle on both the daily and weekly charts. The index has posted lower lows for four consecutive weeks and slipped below its 50-day exponential moving average (EMA), suggesting sustained weakness.
They warned that if Nifty remains below 24,600, the index may slide further to the 24,442 and 24,250 zones. On the upside, resistance levels now lie at 24,800 and 24,950.
India May Face Fallout from Possible US Sanctions
Despite global tensions, the India VIX index, which gauges volatility, fell from 12.59 to 11.54 in July and stayed largely range-bound. However, global geopolitical concerns may still impact market sentiment.
Last week, US President Donald Trump issued a 10–12 day deadline for Russia to end its war in Ukraine. If unmet, new sanctions and secondary tariffs could be imposed on countries trading with Russia.
Since India imports large volumes of Russian oil, any US sanctions on Indian imports may reduce dollar inflows and impact the rupee’s value.
Although crude oil prices remain low for now, analysts warned that escalating tensions could drive prices up in the near future.
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