Nifty futures down 7% thus far in Oct; FIIs remain short, retail bullish

F&O cues for Oct 23: FIIs have been net short in index futures since Oct 10; at present they hold 2 short bets for every long trade; Retail investors' long-short ratio stands at 1.75.

Futures & Options (F&O) Insights for Wednesday, October 23: The Nifty October futures logged its biggest single-day loss in trades thus far this month yesterday as the index slipped over 1 per cent. Amidst this, FIIs who accounted for 14 per cent of traded volume in Nifty futures on Tuesday ended up as net buyers of 182 contracts.

The Nifty October futures have shed nearly 7 per cent post the September expiry. In the same period, foreign Institutional Investors (FIIs) have trimmed their open positions in Nifty futures by 38 per cent, and have been on the short side of trade since October 10.

Technically, the Nifty has confirmed a lower top-lower-bottom structure on the daily chart and also breakdown on the "Head and Shoulders" pattern. Additionally, the Nifty has slipped below the 89-DEMA for the first time since June. Given the overall chart structure and the broad-based sell-off, the near-term outlook appears challenging for bullish traders, and further downside is expected, said Rajesh Bhosale, Equity Technical Analyst at Angel One.

The key support for the Nifty lies around 24,200, where a bullish gap was left in August, with immediate support at 24,300. On the higher side, resistance can be expected around the 24,650 - 24,700 range, the analyst added.

The Bank Nifty futures also declined over 1 per cent, while the open interest (OI) increased by 3.3 per cent.

The Bank Nifty shall find immediate support around 51,000/ 50,800 levels and can see pullback from those levels. On the higher side 52,000/ 52,250 will be a strong supply zone for the index, said Aditya Agarwal, Head of Derivatives & Technical Analysis at Sanctum Wealth.

Key Insights from Nifty options data

The Nifty options saw significant OI build-up in 24,500 and 24,600 Calls; indicating likely resistance around 24,600 - 24,670 for the weekly expiry. On the other hand, 24,300 and 24,400 Puts also saw notable OI build-up; suggesting potential support around 24,250 - 24,330 levels.

FII, DII, and Retail: Who bought and who sold on October 22?

Foreign institutional investors (FIIs) net sold 3,102 contracts of index futures worth Rs 218.62 crore on Tuesday. The NSE data shows that FIIs net sold 1,509 contracts of Bank Nifty futures and 2,285 contracts of MidCap Nifty futures; while net bought 182 contracts of Nifty futures.

The data shows that FIIs open interest (OI) in Nifty futures contracts dropped by 4 per cent to 2.83 lakh contracts. Whereas, the OI in Bank Nifty and MidCap Nifty increased by 2.1 per cent and 2.6 per cent, respectively.

Pursuant to which, the FIIs overall long-short ratio in index futures eased to 0.48. This ratio implies that FIIs hold little more than 2 short positions in index futures for every bullish position.

Meanwhile, retail investors' long-short ratio in index futures dipped from 1.83 to 1.75 - the ratio still implies that retail traders hold near about 7 long bets in index futures for every 4 short trades.

Proprietary traders' long-short ratio increased to 1.17; while domestic institutional investors (DIIs) long-short ratio inched higher to 0.64.

Stocks in F&O ban period on Wednesday, October 23

A total of 12 stocks are placed under the futures & options ban period today. Aarti Industries, Bandhan Bank, Birlasoft, Chambal Fertilisers, GNFC, Indian Energy Exchange (IEX), IndiaMart InterMesh, L&T Finance, Manappuram Finance, Piramal Enterprises, PNB and RBL Bank.