Nifty 50 (23,644) and Nifty Bank (53,710) lost 2.2 per cent and 2.9 per cent, respectively, over the past week. The derivatives data indicates that the market sentiment has weakened over the past week, although the degree of bearishness varies between Nifty and Bank Nifty.

At the broader level, traders continue to hold net short positions on both calls and puts, showing that option writers remain dominant. However, the sharp rise in net call shorts (FII and retail combined), from 59,438 contracts to 1.94 lakh contracts, along with a decline in net put shorts, from 3.58 lakh contracts to 2.93 lakh contracts, suggests that traders are increasingly capping upside expectations while becoming less aggressive in defending downside levels.

This deterioration in options positioning aligns with the futures data. Cumulative futures open interest increased in both Nifty and Bank Nifty while prices declined, indicating fresh short build-up at the index level.

That said, there is a divergence between the two indices.

Nifty 50

Nifty futures, both May and June contracts, dropped 2.4 per cent each. But while Nifty May futures Open Interest (OI) remained broadly unchanged at 170 lakh contracts over the last week, June futures OI increased from 18.4 lakh contracts to 33.5 lakh contracts, denoting short build-up

With respect to options, PCR (Put Call Ratio) of May series dipped from 1.10 to 1.02 and that of June series saw a minor drop from 1.3 to 1.2. Despite the drop in the ratio, it has not slipped below 1, suggesting that option traders are not aggressively bearish yet.

Overall, there has been a build-up in short positions in futures, but positioning in options suggests that conviction could still be moderate than outright bearish. 

Looking at the chart of Nifty May futures, we can see clear rejection at 24,500 area over the past few weeks. On the back of this, the contract falling last week shows that the sellers are now gaining confidence and creating fresh short positions.

Although 23,500 is the nearest support for Nifty May futures (currently at 23,644), we anticipate a decline below this given the above factors. The potential upcoming downswing can drag Nifty futures to 23,000. It could even extend to 22,600.

For Nifty futures to fully shed the bearishness, it should see a strong breakout of 24,750. But given the current chart structure, a rally above 24,000 is unlikely to happen.

Strategy: Short Nifty futures (May) at 23,800. Target and stop-loss can be 23,000 and 24,150, respectively.

Option traders can consider buying June expiry 23,000-put (₹306.60). Go long at ₹250. Target and stop-loss can be ₹650 and ₹95, respectively.

Nifty Bank

Nifty Bank futures, both May and June contracts, fell 3 per cent each. However, OI of the former decreased from 23.2 lakh contracts to 21.8 lakh contracts whereas that of the latter increased from nearly 3 lakh contracts to 5.2 lakh contracts. This hints that traders have already started rolling over short positions from May to June expiry, indicating prolonged weakness.

In the options segment, both May and June PCR dropped, particularly June PCR which slipped from 1.15 to 0.74. This indicates significant call writing, a bearish signal. So, overall, the derivatives data suggests stronger bearish conviction in Nifty Bank when compared to Nifty 50.

Chart also reflects the bearish inclination. After falling below the support band of 54,500-55,000, Nifty Bank May futures has been sustaining below it. Even if there is an uptick from the current level of 53,842, a recovery beyond 55,000 is a big ask given the prevailing price action and how futures and options traders have positioned themselves.

Nifty Bank May futures is likely to see another leg southwards, potentially to 52,200 and 51,000. For the outlook to turn positive, the contract should surpass 58,000.

Strategy: Go short on Nifty Bank futures (May) at 54,700. Target and stop-loss can be 51,500 and 56,000, respectively.

Option traders can buy June expiry 52,000-put contract (₹772.35). Buy at ₹600. Target and stop-loss can be ₹1,200 and ₹300, respectively.

Published on May 16, 2026