Is Nifty Near a Medium-Term Bottom?

As the Nifty 50 index hovers near its crucial support range of 24,450–24,500, the extremely low level of FII long positions indicates that the market may be approaching a medium-term bottom.

What’s Dragging Indian Markets?

The latest downturn was sparked by a 25% import tariff on Indian goods by the US, imposed by former President Donald Trump. This triggered a wave of global selling, dragging Indian equities lower for the fifth consecutive week, the longest losing streak in two years.

Other contributing factors include:

Hawkish commentary from the US Federal Reserve
Disappointing Q1 earnings
Sustained selling pressure from Foreign Institutional Investors (FIIs)

The Nifty50 index dropped by 271.65 points (-1.09%), mid-cap stocks by 1.8%, and small-cap stocks by 2.5%. Sector-wise, Nifty Realty tumbled by 5.7%, followed by Nifty Metal, which declined 3.4%.

FII Selling Continues Unabated

FIIs offloaded equities worth ₹20,524.42 crore last week, pushing the July total to ₹47,666.68 crore. The Indian rupee depreciated by 100 paise, closing at ₹87.52/USD (from ₹86.52), pressured by capital outflows and rising crude oil prices. The dollar index neared the 100 mark.

Global Markets in Red

The tariff news impacted global indices too:

Russell 2000: -4.17%
S&P MidCap 400: -3.53%

In the U.S., the Fed maintained interest rates for the fifth consecutive meeting, but a worsening labor market (as seen in July’s jobs report) spooked investors, prompting further sell-offs.

Is the Market Oversold? Nifty Support Indicators Suggest So

Despite five weeks of declines—last seen in May 2022—technical indicators now point to oversold conditions. The 24450–24500 zone is being closely watched as a potential launchpad for a bounce.

The 20-Day Advance/Decline (A/D) Ratio is near crucial levels
The Open Interest Put Call Ratio (OI PCR) (9-month average) signals potential short-term recoveries
Positive divergence in several indicators hints at reversal possibilities

On the weekly chart, Nifty still trades above 24,450, maintaining the structure of an uptrend. This raises hopes of a technical bounce toward 25,250–25,300, provided the support holds.

FII Derivative Positioning: Second Lowest Longs on Record

As of the latest data:

FIIs hold 158,184 short contracts in index futures
Long positions have dropped to 8.60%, nearing the March 2023 record low of 7.75%

Such extreme positioning often signals capitulation, reinforcing the idea that the market could be bottoming out.

Sector Performance Analysis – RRG Charts Explained

Weekly Sector Rotation Summary:

🔄 Weakening Quadrant

Nifty Bank, Nifty Financial Services, and Nifty Private Bank show declining momentum
Nifty FMCG and Nifty MNC show slight upticks but remain vulnerable

🐌 Lagging Quadrant

Nifty PSU Bank, Realty, Infra, Energy, Oil & Gas, IT, Media are losing both momentum and strength

📈 Improving Quadrant

No sector currently falls in this category

🚀 Leading Quadrant

Nifty Financial Services is gaining relative strength
Nifty Pharma and Nifty Auto lead but risk moving into the weakening zone

Key Takeaway

The market appears to be oversold, and technical indicators are flashing early reversal signals. However, confirmation will come only if the Nifty closes above 25,250–25,300. Watch for further developments in: