 "Analysts expect short-covering in Nifty; FIIs trim Bank Nifty bearish bets")
Futures & Options (F&O) Insights for Friday, October 25: The Nifty October futures ended lower for the fourth straight day yesterday amid range-bound trade.
The Nifty consolidated in a narrow band of 50-60 points in Thursday's trading session with a bit of negative bias. From a short term perspective, most of the technical indicators are in an oversold zone and are indicating towards a short covering move in the index, said Aditya Agarwal, Head of Derivatives & Technical Analysis at Sanctum Wealth.
However, any pullback in Nifty will be short lived as overall medium term structure remains weak. A short covering move towards the 24,620/ 24,740 levels can be used as an exit opportunity from short term trading positions and initiate fresh shorts, the analyst said.
Echoing similar views, Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas said, on the daily charts the Nifty appears a bit oversold. This can lead to a pullback towards 24,550 – 24,600 zone where the key hourly moving averages are placed.
Meanwhile, the Bank Nifty futures had snapped its 3-day losing streak and ended 0.6 per cent higher. Data shows, the FIIs seem to have pared short positions in the Bank Nifty futures.
Technically, the Bank Nifty has formed a bullish candle followed by an inverted hammer candle which was formed near 100-DEMA support. The pullback rally may continue towards 52,000 levels as long as Bank Nifty remains above 51,000 levels, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.
Key Insights from Nifty, Bank Nifty options data
More From This Section
In the Nifty options market, rising caution is evident, with aggressive call writing (Bear activity) outpacing put activity, underscoring a shift toward bearish sentiment. Increased call writing at 24,500-25,000 reflects sellers adjusting to lower levels, while put unwinding suggests weakening confidence among buyers, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities.
The put-call ratio (PCR) has risen from 0.55 to 0.76, indicating a growing bearish sentiment as call writers dominate. The 'max pain' level, where most options expire worthless, is currently set at 24,450, marking a critical pivot for the market's next move.
In case of Bank Nifty, increased call writing at the 51,600 - 52,000 levels indicates that sellers are establishing strong positions at these critical psychological barriers, while put writers are cautiously building positions at lower levels in the current bearish environment.
The Put-Call Ratio (PCR) has risen from 0.70 to 0.91, reinforcing a sideways sentiment as call-and-put writers are nearing parity in their positions. The 'max pain' level is currently positioned at 51,700, the analyst from SAMCO Securities said.
FII, DII, and Retail: Who bought and who sold on October 24?
Foreign institutional investors (FIIs) net bought 22,704 contracts of index futures for Rs 1,672.27 crore on Thursday. The NSE data shows that FIIs net bought 2,947 contracts of Nifty futures to the tune of Rs 179.43 crore; 17,310 contracts of Bank Nifty futures worth Rs 1,338.16 crore and 2,558 contracts of Nifty MidCap futures for Rs 160.15 crore.
The data shows that FIIs open interest (OI) in Nifty futures contracts dipped a wee bit to 2.85 lakh contracts, while FIIs covered some of their recent short positions in Bank Nifty as the OI declined by 3.7 per cent amid net purchases of 17,310 contracts. On the other hand, the OI in MidCap Nifty futures surged by 6.3 per cent yesterday.
Pursuant to which, the FIIs overall long-short ratio in index futures rose by 6 basis points (bps) to 0.54. This ratio, however, still implies that FIIs hold near about 2 short positions in index futures for every bullish bet.
Meanwhile, retail investors' long-short ratio in index futures also increased by 6 bps to 1.82. Proprietary traders', however, turned bearish as the long-short ratio dropped to 0.77 per cent from 1.09 per cent. DIIs long-short bets remain steady at 0.68.
Stocks in F&O ban period on Friday, October 25
A total of 9 stocks are placed under the futures & options ban period today. Aarti Industries, Bandhan Bank, Escorts, Indian Energy Exchange (IEX), IndiaMart InterMesh, Manappuram Finance, NMDC, Piramal Enterprises and RBL Bank.