Nifty Below 25,500: SEBI RA Flags Two Likely Expiry Scenarios

Indian equity markets ended in the red on Wednesday as concerns over the trade deal negotiations weighed on sentiment, although retail sentiment remained bullish on the Nifty, which closed below the crucial 25,500 mark. 

Analyst Bharat Sharma of Stockace Financial Services noted that the broader market sentiment remained bullish, provided the Nifty index stays above key support levels of 25,400, 25,200, 25,100, and 25,000, respectively.

His positional approach remains positive as long as the market trades above the 25,100-25,000 range, or the 20-day Exponential Moving Average (EMA). In intraday terms, the index found support from the 200 EMA on the 15-minute timeframe at 25,370-25,400 levels. A decisive move below this level could trigger an intense correction. 

Sharma identified immediate support at 25,420-25,430, and if the index falls below this level, it could move quickly to the 200 EMA, located at 25,370-25,380. If this level also fails to hold, he sets the next downside targets at 25,300-25,250-25,180.

On the upside, he sees immediate resistance at 25,480-25,500. A breakout above this could lead to a rally to 25,550-25,600 and higher. He added that sustained gains above 25,600 are necessary to confirm a bullish trend. 

In terms of triggers, the market is eyeing the first quarter (Q1) FY26 results season in July for further direction, along with key data releases.

Highlighting the open interest (OI) data for weekly expiry on Thursday, the put-call ratio stands at 0.6, indicating bearishness in the system; however, it may not be sustainable.

Extensive call writing at 25,500, 25,600, and 25,700 strike prices suggests that call writers may attempt to push the prices down at the open. Lack of enough put writing at-the-money (ATM) strikes, with 25,000 serving as a proper support on the downside. 

Sharma noted that there are two scenarios for the expiry session today: 

1. If straddle premiums decline rapidly by 50-60 points in the first hour, a muted expiry below 25,500-25,450 is likely.
    
2. If the premiums remain stable or increase in the first hour, then a sharp move in either direction is expected.
    

He highlighted that if the Nifty index sustained above 25,500 and higher, short covering could trigger a rally, especially if it holds 25,550-25,600. Heavy call writing here could lead to a 200-300 point gain. He believes this scenario is more likely to occur. 

On the other hand, if the Nifty index breaks below the 200 EMA, bears are likely to strengthen their grip on the downside and push the market lower to 25,300-25,250-25,200, as there is limited support according to the OI data. 

However, Sharma believes that the probability for this bearish scenario is lower because they are already dominant and would benefit the most from a move below 25,500.

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