The Nifty 23,800 level has become a major resistance point for bulls for now, leading market analysts to wonder if bears possess insights others lack despite growing hopes for a West Asian peace deal. While global benchmarks like the Nasdaq and Nikkei surged more than 1% on Wednesday amid this optimism, the Nifty has struggled to follow suit.
This trend is particularly evident in the last two trading sessions through Wednesday, as bears aggressively built positions on 23,800 call options expiring next Tuesday, amid hopes of a last-minute breakthrough in negotiations between the warring sides.
When option writers sell a huge quantity of calls at a specific strike price, they are betting that the market will not rise above that level. If they are correct, the options expire worthless, allowing the writers to keep the premiums paid by the buyers.
This is currently the case at the 23,800 mark, which has remained unbroken since 11 May, despite the market repeatedly testing that level.
This is highlighted by the open interest (OI)—or total outstanding positions—nearly doubling from the previous session to about 3.03 million contracts on Tuesday. On Wednesday the OI surged another 20% to 3.69 million contracts. The price of the option simultaneously fell 30% to ₹138.15 a share (65 shares make one contract) on Wednesday from ₹195.5 on Monday.
The fall in prices alongside an increase in OI indicates bearish sentiment. Options writers tend to be financially more astute than options buyers as they take on unlimited risk. Options buyers on the other hand take relatively small risks in exchange for outsized returns. They stand to lose only the premium they pay to sellers, which could drop to zero at worst. But their potential gains are unlimited as prices could keep rising.
The bearish stance at 23,800 is further reinforced by the activity of major market players. As of Wednesday’s close, foreign portfolio investors (FPIs) were net sellers of 222,156 cumulative index call contracts (Nifty and Bank Nifty), while retail investors, domestic institutions, and proprietary traders were net buyers. FPIs’ total secondary-market sales from 1 January to 19 May stood at ₹2.31 trillion, just ₹9000 crore shy of their record ₹2.4 trillion sale in the whole of 2025.
Nasdaq and Nikkei surge
"The [23,800] level is a key hurdle that bulls haven't been able to cross," said Rajesh Palviya, senior vice president (derivatives and technicals) at Axis Securities. “While markets haven't fallen off a cliff yet, they haven't been able to break the resistance despite global benchmarks such as Nikkei and Nasdaq rising amid growing hopes of a renewed peace deal in West Asia," he added.
The Nikkei gained 1.3% while the Nasdaq rose 1.5% on Wednesday as hopes of peace in West Asia gained ground. The Nifty, however, gained less than 0.2%, closing at 23,659. A day earlier the Nifty had climbed to 23,782.3 before paring gains to close at 23,618, down 0.13% from Monday's closing.
However, sentiment remains weighed down by the geopolitical conflict. The Nifty closed at 23,659 on Tuesday, down 6% since the conflict between the US, Israel and Iran began on 28 February.
Energy prices have mirrored this volatility, directly impacting market sentiment. Brent crude hit $112 a barrel on Wednesday, up 55% since 28 February. However, optimism around a potential peace deal saw prices retreat nearly 6% to an intraday low of $105.45 on Thursday.
"If and only if 23,800 is broken could we rise to 24,100 in the current expiry series," said Kruti Shah, quant analyst Equirus Securities, citing the massive jump in OI on Tuesday and Wednesday.
Shah added that a peace deal could induce a short covering rally in the Indian market by forcing bears to close out their short call positions. Index options such as Nifty expire every Tuesday, with a monthly expiry slated for the last Tuesday of a month. The current positions have been taken for the monthly expiry on 26 May.