With hopes of a Santa rally fading, traders head into the final week of 2025 focused on Nifty’s technical levels, derivatives positioning, and foreign investor flows. A recent pullback from record highs has reset the base, raising questions on whether the index can stabilise near key supports or see a late-year rebound.

Edited excerpts from a chat with Anand James, Chief Market Strategist, Geojit Investments Limited:

Hopes of a Santa rally are looking dim after the penultimate week of 2025. How would you trade the last weekly expiry of the year?

The decline from the vicinity of the record peak was not unexpected, and hence it would be premature to count last week’s decline as the start of a major fall. Further, this is the first Friday among the last three, when we have had a decline in Nifty. This ensures that we would be entering the last week of the year on a relatively lower base. A regrouping of the bulls may be expected, once in the vicinity of 26,000, which, if successful, could turn into a vertical recovery aiming 26,550-850. Supports close by are at 25,935 and 25,850, a break of which would expose 25,740-650.

How have FIIs positioned themselves for the January series, and do you think Nifty is up for a bounce in the first month of 2026?

FIIs hold only 11.1% of their index futures positions as long, with no clear signs of turning bulls. In fact, though FIIs were seen adding longs mid-week, the trend was reversed on Friday, having cut longs by 7.5%, while adding index future shorts by 5.6%. While there are no outright signs of FIIs turning buyers, it is to be noted that last week ended with higher longs and lower shorts than the previous week, raising hopes of buying support from FIIs.

Defence stocks have been getting some attention in the last few days. Do you think that the rally will sustain, and one can ride the tide?

The Nifty India Defence Index rebounded strongly from the 7,400 horizontal support zone, forming a weekly pattern resembling a Morning Star, a classic reversal signal. The index closed above key levels, including the Supertrend at 7,750 and the 20DMA at 7,679, reinforcing positive sentiment. From a derivatives perspective, while Friday saw long unwinding in most stock futures, weekly data indicates short covering, aligning with a short-term bullish outlook.

On the stock front, names like HAL, BEL, Solar Industries, Mazagon Dock, GRSE, and BDL have posted robust weekly reversal patterns, suggesting continuation of the prior uptrend. This momentum could propel the index toward 8,050 and 8,300 in the short to medium term.