Nifty Faces Longest Losing Streak Since 2001 as FII Shorts
The Nifty's September derivatives series was its worst in 25 years, with a 6.7% drop driven by heavy foreign institutional selling.
Foreign institutional investors dramatically increased their bearish bets on the Nifty index during the September derivatives series, which saw its worst performance in a quarter century. The benchmark fell 6.7%, losing more than 1,400 points, as FIIs' net index short position widened to 2.67 lakh contracts from 1.84 lakh at the start of the series.
FIIs added 87,102 index short positions while adding only 4,022 long positions during the series, resulting in an FII Index Futures Long ratio of just 0.09 relative to the previous expiry. Their activity in stock futures also turned more cautious, with net long positions declining to $3,645 million from $4,546 million. Stock-futures longs fell 2.5% while shorts rose 0.7%. Nuvama Institutional Equities reported FIIs' net longs in stock futures stood at 4,96,000 contracts, down from 6,01,000 at the start of September. FIIs recorded net outflows of $3 billion during the series after two consecutive months of buying.
The index is now trading below both its downward-sloping 50-day and 200-day moving averages. This technical breakdown coincides with the market's broader pressure from elevated crude prices, a weak rupee, hardening bond yields, and persistent foreign selling.
Technical indicators show oversold conditions and key support levels
Momentum readings suggest the sell-off may be overextended. The Nifty’s daily Relative Strength Index was at about 27, showing positive divergence, while the weekly stochastic oscillator was in an oversold zone. These conditions could support an intermediate technical pullback, though broader momentum indicators have not yet reached oversold territory.
The index has slipped into a key long-term support zone. Rupak De, senior technical analyst at LKP Securities, said the index had slipped to its 200-week moving average, currently placed at 22,600. ICICI Securities placed the 200-week exponential moving average at about 22,400, noting that this level coincided with the 80% Fibonacci retracement of the preceding up move and a rising trendline support. Another analyst, Systematix, identified 21,900-22,200 as a key support zone.
Rupak De said: "Therefore, 22,600 will remain a crucial support level for Nifty. On the higher end, immediate resistance is placed at 22,800." A sustained move above 22,700 would be important for a change in the current technical setup. The broad market weakness is evident, with ICICI Securities noting that 82% of Nifty 500 stocks were trading below their 50-day simple moving averages.
Historical context and market pressure
The current decline mirrors a similar drop from September 2001, when the Nifty fell 6.5%. Before this week, the index had ended seven consecutive weeks in the red. If bulls fail to engineer a recovery this week, it will post an eighth straight weekly decline. That would mark its longest losing streak since 2001, when the index fell for nine consecutive weeks.
In the past 25 years, the Nifty has recorded seven or more consecutive weekly losses only four times: in 2020, 2008, and twice in 2001. The market's direction now hinges on the index's ability to hold above the 22,600 support level.
