Nifty, Bank Nifty: Should you buy the dips? Expert views; FIIs in Feb F&O

Cues from F&O data: Despite holding a bearish view in the February series, data shows FIIs may have added few long positions in Nifty, MidCap Nifty futures; while added short positions in Bank Nifty.

The NSE Nifty 50 index has been consolidating in the tight 200-point trading band, i.e. in between 22,800 - 23,000 for the last three trading sessions. On Thursday, the Nifty ended 0.1 per cent lower at 22,913 - marginally below its trend line support for the first time since February 04, 2025.  Whereas, the Bank Nifty has moved in a 1,000-point band; broadly between 49,700 - 48,700 range in the last seven trading sessions. On Thursday, the Bank Nifty moved in an extremely narrow band of 300-odd points, and settled 0.5 per cent lower at 49,335.  Meanwhile, in the derivatives market the Nifty February futures were down 0.2 per cent in the last four trading sessions alongside a 5.7 per cent decline in the open interest (OI). The Bank Nifty futures, however, were up 0.3 per cent amid a 5.4 per cent dip in OI.  Market experts believe that the recent Nifty and Bank Nifty performance hint towards a slightly positive bias, and recommend a 'Buy on Dips' strategy. Here are the details.  Dhupesh Dhameja, Derivatives Analyst, SAMCO Securities  On the daily chart, the Nifty remains trapped in a consolidation phase, signalling indecisiveness in the broader trend. While persistent dip-buying suggests underlying strength, the lack of follow-through above resistance levels raises concerns over sustainability.  In Nifty options, a significant build-up in OI at the 23,500-strike Call (92.21 lakh contracts) confirms a strong ceiling for the index, while solid Put writing at the 22,000 strike highlights firm support at lower levels.    The 23,000 – 23,500 zone remains under intense Call writing and selling pressure, whereas consistent Put additions between 22,900 - 22,700 indicate a fierce tug-of-war between bulls and bears. The Put-Call Ratio (PCR) climbed to 0.81 from 0.70, indicating that sellers still hold an upper hand despite some bullish attempts.  In the case of Bank Nifty, the index remains trapped within a consolidation zone, signalling the absence of a strong trend on the daily chart.  A sharp rise in open interest at the 51,000-strike Call (22.87 lakh contracts) establishes it as a strong resistance level. On the downside, robust Put writing at the 49,000 strike (15.45 lakh contracts) indicates firm support, signifying that bulls are actively defending key levels.  Despite the elevated volatility, the 'Max Pain' level at 49,700 suggests that sharp downside moves may remain contained unless key support levels are breached, which could trigger accelerated selling pressure.  Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates  Technically, on the daily chart, Nifty has formed a bullish 'Marubuzo' candlestick pattern, indicating strength. A buy-on-dips strategy remains favourable as long as Nifty holds above its recent low of 22,725. The 21-Day Simple Moving Average (DSMA) at 23,210 serves as an immediate hurdle and a decisive move above this level could trigger fresh bullish momentum.  The Bank Nifty, on the other hand, has formed a 'Doji' candle, indicating uncertainty. The index needs to sustain above 49,650 for an up move towards 50,000 levels. On the downside 48,800 will act as immediate support for the index.    FIIs, DIIs, retail investors trading activity  As we reach towards the end of the February futures & options (F&O) series, the overall net holdings of various categories of investors remains more or less the same.  The FIIs who started the February series with extremely bearish bets in the index futures, with a long-short ratio of 0.13; continue to hold the same view with the long-short ratio now at 0.19 - this ratio implies presence of 5 short positions in index futures for every long bet.  A closer look at the F&O data from NSE shows that FIIs have net sold 1,293 contracts of Nifty futures thus far in the February series. Whereas, FIIs have net sold 16,878 contracts of Bank Nifty, and net bought 1,136 contracts of MidCap Nifty futures as of February 20, 2025.  In comparison, the overall OI in Nifty futures has risen by 21,881 contracts, in Bank Nifty by 29,236 and MidCap Nifty by 5,422. The comparative data of net trading and OI indicates that FIIs may have added some long bets in Nifty and MidCap futures, while added short positions in Bank Nifty in this series thus far.  Meanwhile, among other participants, domestic institutional investors (DIIs) and proprietary traders hold near about 3 long positions in index futures for every short bet. Retail investors hold near about 5 bullish bets for every 2 short trades. 
 

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