Post March F&O series, analysts are keeping hopes high from April series based on the derivatives trend and historical returns by the domestic stock market in the month. Stock market analysts noted that the March F&O series saw some relief rally after the brutal January and February series, where the bears dominated and the bulls struggled daily. The extremely negative and oversold market setup led to a strong bounce, providing much-needed respite, said Nuvama Institutional Equities as it felt that the rally was largely driven by the unwinding of index shorts by foreign institutional investors (FIIs), along with their cash buying in the second half of the expiry month.
It said continuous buying by FPIs too helped but high-net worth individuals (HNIs) and retail investors stayed on the sidelines. For the F&O series, the Nifty Smallcap index gained 6.4 per cent, the Nifty Bank rose 5.8 per cent, the Nifty Midcap climbed 5.5 per cent, and the Nifty Index advanced 4.6 per cent.
"The March 2025 rebound was primarily driven by FII short covering, while HNI positioning remained on the lighter side as they reduced their long-side bias. The rally was largely a result of FII unwinding shorts and cash buying (Active + FTSE Rejig $1.4 billion). Looking ahead, we believe the April series can continue to show strength and gain momentum. Historical 10-year seasonality suggests a 70 per cent probability of a positive bias, with the Midcap Index gaining 80 per cent of the time," it said.
JM Financial said its analysis indicates that the Nifty has exhibited a positive price seasonality in the month of April. In the last 10 years, the index has closed in the green on seven occasions with an average return and a median return of 2.4 per cent and 1.3 per cent respectively. The Nifty Mid-cap index too has exhibited a stronger price seasonality in the month of April. In the last 10 years, this index has closed in the green on eight occasions with an average return and a median return of 4 per cent and 4.3 per cent respectively. JM Financial said Nifty Mid-cap index has outperformed the Nifty on nine occasions with an average outperformance of 1.6 per cent and a median outperformance of 2 p cent.
Nuvama said HNI derivative positioning remains light, with current open interest in single stock Futures (SSF) at $13 billion, down from $14.9 billion at the start of March and $17 billion at the start of February. Their index long holdings have also dropped to $0.2 billion, compared to nearly $3 billion at the start of March, indicating they remain largely on the sidelines.
"We anticipate Nifty to bounce towards 24,050, with strong support at 23,100. The market is likely to remain rangebound with a positive bias, while volatility could be influenced by the earnings season. The IT Index, which has been heavily beaten down, could surprise on upside. A lot depend upon the upcoming result season. The Auto Index, despite facing pressure, may encounter further hurdles before staging a recovery," Nuvama said.