F&O cues: FIIs bullish on Nifty MidCap; JK Cement, Deepak Nitrite on radar

Derivatives market update for Friday, August 23: Analysts suggest Nifty options market reflects a bearish sentiment, with increased Call writing vs. Puts, as the index nears major hurdles.

The Nifty futures in the last four trading sessions has gained more than 1 per cent, and seen up to 6.5 per cent decline in open interest (OI), which is partly in account of the nearing of August expiry. The same can be asserted by the rollovers seen to the September series, wherein Nifty futures OI has jumped by 44.6 per cent in the same period.

The Nifty futures premium for the August series remained constant at 28 points on Thursday. Trading volumes were below average for the fourth straight day, with around 1.32 lakh contracts traded on August 22 as against the last 7-day average volume of around 2.10 lakh contracts. The September futures are seen quoting at 152-point premium to the spot Nifty.

The overall open interest (OI) in Nifty August futures declined by 0.5 per cent (2,175 contracts); while it rose by 12.3 per cent (8,368 contracts) in the September series compared to the previous trading session.

The Nifty ended above the 24,800-level for the first time in since registering its new all-time high at 25,078 on August 01. 

Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates, believes that Nifty has entered the gap zone of 24,852 - 24,956 but faced profit booking, leading to the formation of a red candle on the daily scale.

For a fresh bullish trigger, the Nifty needs to cross the hurdle of the 24,950 - 24,960 zone. On the downside, the 21-Day Exponential Moving Average (DEMA), positioned near 24,480, will act as strong support. As long as the index holds above this level, a 'buy on dips' strategy should be employed, Hrishikesh added.

Meanwhile, the Bank Nifty August futures ended 0.6 per cent higher yesterday, while the OI was down by 2.9 per cent (5,161 contracts). At the same time, OI also declined by 10.1 per cent in the September series; thus highlighting short-covering.

We have now entered the last leg for the August series expiry; here are the key insights from the Nifty, Bank Nifty Options thus far.

The Nifty options market is reflecting a bearish sentiment, with increased Call writing compared to Puts, especially as the index nears its major resistance levels where significant Call positions have been established, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities in a note.

Substantial open interest is noted at the 24,800 Call (2.71 crore contracts) and the 24,700 Put (85.68 lakh contracts), with considerable activity around the 24,750 Puts and 24,850 - 24,900 Calls.

The Put-Call Ratio (PCR) has eased from 1.10 on Wednesday to 0.88, signaling a slight bearish shift as the index approaches these resistance levels. The Max Pain Point, the level with the most open options contracts, stands at 24,800, acting as a crucial level influencing the Nifty's movement, Dhupesh added.

On the Bank Nifty, notable open interest is observed at the 51,000 Call (27.32 lakh contracts) and the 51,000 Put (23.69 lakh contracts), with significant activity around the 51,200 - 51,500 Calls and 50,500 - 50,800 Puts.

The Bank Nifty PCR has risen from 0.78 on Wednesday to 0.93, indicating a slightly sideways sentiment as the index grapples with sustaining above the 51,000 level. The Max Pain Point, where the highest concentration of open options contracts is located, stands at 51,700, serving as a critical reference for the index's movement, the note from Samco Securities stated.

Meanwhile, Chandan Taparia, Senior VP, Equity Derivatives & Technicals at Motilal Oswal Financial Services says that a decline in volatility and surge in PCR indicates an overall bullish bias. The VIX has declined from levels of 23 to levels of 13.

In order to take advantage of the bullish market, Chandan recommends buying 1 Lot of Nifty 24,800 Call and simultaneously selling 1 Lot of Nifty 25,000.

FII, DII trading activity in F&O - Here's all you need to know about who bought and who sold on August 22?

As per data from the NSE, FIIs net bought 7,101 contracts of index futures on August 22 for a consideration of Rs 607.10 crore. FIIs net sold 6,859 contracts of Nifty futures, while bought 10,770 contracts of Bank Nifty futures and 3,235 contracts of MidCap Nifty futures.

Pursuant to which, FIIs long-short ratio in index futures rose a wee bit to 1.1:1 – this ratio implies that foreign investors hold more than 1 long position in index futures for every single bet on the short side of trade. The FIIs longs in index futures now stand at 52.30 per cent.

Data shows that FIIs reduced positions in Nifty futures, while covering shorts in Bank Nifty futures. Interestingly, FIIs have been steadily increasing bets in Nifty MidCap futures.

Meanwhile, domestic institutional investors (DIIs) continue to hold near about 2 short positions for every long open position in index futures. DIIs index futures long-short ratio stands at 0.55:1; with net longs at 35.39 per cent.

Retail traders long-short ratio remained steady around 1.1:1, with marginal decrease seen both in the long short positions. Retail traders net long in index futures stand at 52.65 per cent.

Bullish & Bearish stocks

On Thursday, Deepak Nitrite saw a huge 22.3 per cent jump in OI, even as the stock ended on a flat note. Among others, JK Cement, MphasiS and IndiGo also witnessed notable long additions as these stocks rose by 1 - 4 per cent, with up to 8 per cent increase in OI.

On the other hand, SAIL and RBL Bank which were under F&O ban period saw a significant 33 per cent decrease in OI on Thursday. RBL Bank rose 0.6 per cent, while SAIL dipped 0.9 per cent.

Among others notable unwinding was visible in Indus Towers, Crompton Greaves, Voda Idea, Indian Energy Exchange (IEX), Aurobindo Pharma, NMDC and Bandhan Bank. 

 

Stocks in F&O ban period

A total of 14 out of the 181 stocks in the futures & options segment are placed in the F&O ban period on Friday. 

Aarti Industries, Aditya Birla Fashion Retail, Birlasoft, Chambal Fertilisers, GNFC, Granules India, Hindustan Copper, Indian Energy Exchange, India Cements, LIC Housing Finance, National Aluminium, Piramal Enterprises, RBL Bank and Sun TV are the 14 stocks in F&O ban today.

Traders are not allowed to take new positions in stocks placed under the F&O ban. Traders are permitted to only exit existing open positions. In case, any new position is opened during the ban period, exchange levies a penalty on every such trade.

As and when the open interest in the stock falls below 80 per cent of the market wide limit, the stock shall be removed from the ban period.