 "FIIs add short positions in Nifty, Bank Nifty; OI rises up to 75% in Nov")
Futures & Options (F&O) Insights for Thursday, November 14: The NSE Nifty 50 tested its 200-DMA for the first time in the last 19 months in trades on Thursday. The NSE index has now plunged more than 10 per cent from its peak and technically entered a correction territory.
Deepak Jasani, Head of Retail Research at HDFC Securities says that the Nifty has entered correction territory, having fallen 10 per cent from the recent high. Cash market volumes on the NSE were higher, suggesting some bottom fishing by local investors. Broad market indices fell much more than the Nifty and this is reflected in the poor advance decline ratio.
Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates explains the Nifty has tested its 200-day exponential moving average (DEMA) support which is placed around 23,540. A strong break below 23,500, will push the index further lower to 23,300 - 23,200 levels, where the trend line support is placed.
The Nifty has broken a momentum support level at 23,950, suggesting that a corrective or consolidative phase may continue. Resistance is now positioned at 24,500/ 24,800, and as long as Nifty remains below these levels, the bias stays negative, adds Sahaj Agarwal, Senior Vice President, Head of Derivatives Research at Kotak Securities.
Meanwhile, the Bank Nifty dipped near about the 50,000-mark on Thursday amid the late sell-off. Yesterday was the last trading day for the weekly Bank Nifty contracts. Going forward, only Nifty contracts will be traded on a weekly basis on the NSE.
Chart shows, on a daily scale the Bank Nifty has formed a bearish candle and broke the short-term consolidation band of 50,500 to 52,580, indicating further weakness, says Hrishikesh Yedve.
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Thus, any bounce near 50,500 - 50,550 will act as stiff resistance for the Bank Nifty. On the downside, 200-day exponential moving average (DEMA) at 49,900, and its previous support base near 49,650, may provide support to the index, says the analyst from Asit C. Mehta.
That apart, starting December series a total of 45 new stocks including the likes of Zomato, Jio Financial, PB Fintech, Nykaa, Paytm, Delhivery and Avenue Supermarts have been added by the NSE to the F&O basket.
Key Insights from Nifty, Bank Nifty options data
The Nifty options data reveals a bearish sentiment among traders. Aggressive call writing from 23,700 to 23,900 reinforces resistance around 24,000, while concentrated put activity in the 23,500 – 23,300 range points to possible support near 23,500, says Dhupesh Dhameja, Derivatives Analyst at SAMCO Securities.
The put-call ratio (PCR) inched up from 0.52 to 0.54, reflecting cautious sentiment as sellers continue to exert control, with the market now in oversold territory. The max pain level for the Nifty is positioned at 23,900, Dhupesh said.
In the case of Bank Nifty, too, call writers (Bears) significantly outweighs put writers, indicating that traders are taking a defensive stance.
Active positions in the 50,200 - 50,500 Call range and the 49,900 – 49,500 Put range reinforces resistance around 50,500 and support near 49,500. The max pain level for Bank Nifty stands at 50,400, believes the analyst from SAMCO Securities.
FII v/s Retail v/s Proprietary traders: Who is bullish/ bearish?
Foreign institutional investors (FIIs) were net sellers of 27,202 contracts of index futures worth Rs 1,885.89 crore on Wednesday. They net sold 9,654 contracts of Nifty futures to the tune of Rs 574.44 crore and 16,629 contracts of Bank Nifty futures worth Rs 1,254.60 crore. FIIs also net sold 606 MidCap Nifty futures contracts for Rs 37.21 crore.
The NSE F&O data shows that the FIIs open interest (OI) in Nifty futures jumped 9.3 per cent to 1.62 lakh contracts; thus implying likely addition of fresh short positions. FIIs OI in Nifty futures has now risen by over 75 per cent since the start of the Nifty series, wherein the NSE benchmark has dipped nearly 3 per cent in the same period.
Further data shows that Bank Nifty OI also rose by 8.4 per cent yesterday. The overall OI in Bank Nifty has increased by 33.8 per cent thus far in the November series, alongside a little over 1 per cent dip in the underlying banking index.
Pursuant to which, FIIs long-short ratio in index futures remains at around 0.29 - this ratio implies that foreign investors hold 3 short positions in index futures for every long trade. The ratio has been around these levels since the start of this series.
Meanwhile, retail investors' long-short ratio increased by 17 basis points (bps) to 2.07 - suggesting presence of more than 2 bullish positions in index futures for every short trade. Proprietary traders, on the other hand, saw a 13 bps dip in the long-short ratio to 0.68 - as they pared some of their long bets.
Stocks in F&O ban period today, November 14
Aarti Industries, Aditya Birla Fashion Retail, GNFC, Granules India and Hindustan Copper are the 5 stocks placed under F&O ban period on Thursday.