 "Nifty futures premium erodes; options hints at more pain below 24,700")
Futures & Options (F&O) Insights for Tuesday, October 22: The Nifty October futures traded with a negative bias yesterday and eventually ended 0.3 per cent lower at 24,789 with the premium reducing to 8 points as against 95 points the day before. The open interest (OI) too declined by 2.7 per cent to 5.16 lakh contracts.
Technically, the Nifty formed a bearish candle on Monday, which indicates weakness. However, the index managed to hold the neckline support of the head and shoulder pattern and close above the 24,700 level, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.
On the upside, the 21-day Exponential Moving Average (21-DEMA) around 25,120 will be the major hurdle for the Nifty, followed by 25,240. If Nifty sustains below 24,700, then further weakness could be possible, the analyst said in a note.
Meanwhile, the Bank Nifty October futures also dipped 0.3 alongside a sharp fall in premium. The premium for the October series plunged from 216 points to 77 points, while the OI decreased by 3 per cent.
On the chart, the Bank Nifty too formed a bearish candle but managed to close just above the 21-Day Exponential Moving Average (21-DEMA) support, which is placed near 51,915.
On the downside, the 100-DEMA support is positioned near 51,090, with last week's low near 51,000. Thus, 51,000 - 51,100 could offer good support for Bank Nifty in the short term, said Hrishikesh Yedve.
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Key Insights from Nifty, Bank Nifty options data
In the options market, there is a significant concentration of open interest at the 25,000 Call and 24,500/24,000 Put levels. The Nifty Put-Call Ratio (PCR-OI) stands at 0.59, indicating a cautious market sentiment, said Sahaj Agarwal, Senior Vice President, Head of Derivatives Research, Kotak Securities.
In the near future, 24,700 is expected to act as a key support level for the Nifty, while 25,250 could serve as a crucial hurdle. A breakout on either side may trigger a directional move in that respective direction, Sahaj added.
Active trading within the 24,800 - 24,900 Call range and the 24,500 - 24,700 Put range highlights resistance near 24,900 - 25,000 and support between 24,500 - 24,700. The increased call writing between 24,800 and 25,000 indicates that sellers are establishing positions at these psychological levels, while put writers remain cautious amid the prevailing bearish sentiment, explains Dhupesh Dhameja, Technical Analyst at SAMCO Securities.
In case of Bank Nifty, options data indicates substantial OI at the 52,500 strike calls (36.79 lakh contracts) and the 51,000-strike put (26.39 lakh contracts). Active trading in the 52,000 - 52,200 Call range and the 51,700 - 51,900 Put range suggests resistance around 52,000 - 52,200 and support between 51,500 - 51,900, the note from SAMCO Securities stated.
The Put-Call Ratio (PCR) has dropped from 1.26 to 0.86, signalling a shift towards bearish sentiment as call writers reinforce their dominance. The 'max pain' level at 52,000 remains a critical threshold for determining the market's next direction, Dhupesh said.
FII, DII, and Retail: Who bought and who sold on October 21?
Foreign institutional investors (FIIs) net sold 5,706 contracts of index futures worth Rs 333.13 crore on Monday.
The NSE data shows that FIIs net sold 5,722 contracts of Nifty futures for a consideration of Rs 356.81 crore and 2,366 contracts of MidCap Nifty futures; while net bought 1,829 contracts of Bank Nifty futures for Rs 142.21 crore yesterday.
The data shows that FIIs open interest (OI) in Nifty futures contracts dipped by 1.9 per cent to 2.95 lakh contracts. Whereas, the OI in Bank Nifty futures increased by 4.2 per cent to 1.31 lakh contracts and in case of MidCap Nifty the OI moved a tad higher to 62,700 contracts. The overall OI in index futures, however, decreased by 1,1000odd contracts to 4.92 lakh contracts.
Pursuant to which, the FIIs overall long-short ratio in index futures eased a wee bit to 0.49. This ratio implies that FIIs hold 2 short positions in index futures for every long open position.
Meanwhile, retail investors' long-short ratio in index futures climbed to 1.83 - its highest level since June 05. Retail investors now hold near about 7 long bets in index futures for every 4 short trades.
Proprietary traders, further, pared their bullish bets by 9 basis points to 1.09 - meaning they now hold near about an equal amount of bullish and bearish bets in index futures.
Whereas, domestic institutional investors (DIIs) long-short ratio remained steady at 0.62.
Stocks in F&O ban period on Tuesday, October 22
A total of 16 stocks are placed under the futures & options ban period today. Aarti Industries, Bandhan Bank, Birlasoft, Chambal Fertilisers, GNFC, Granules India, Hindustan Copper, IDFC First Bank, Indian Energy Exchange (IEX), IndiaMart InterMesh, L&T Finance, Manappuram Finance, Piramal Enterprises, PNB, RBL Bank and SAIL.