Can Nifty hit 26,000 post Fed rate cut? Check FIIs, retail bets here

Derivatives market update for Sept 18: Foreign investors continue to hold bullish bets in Nifty, Bank Nifty; while retail investors have increased short positions. Here's what experts have to say.

F&O Insights for Wednesday, September 18, 2024: Foreign Institutional Investors (FIIs) and retail investors are said to be at crossroads when it comes to existing positions in the futures & options segment. 

The FIIs have been holding fairly bullish bets in index futures - which mainly include Nifty and Bank Nifty September contracts; while, retail investors barring a brief buying spree last week have mostly been holding bearish bets.

On Tuesday, the Nifty September futures inched a tad higher alongside 2 per cent decline in the open interest (OI). The premium in Nifty futures declined to 31 points from 59 points the day before.

 

Despite the winning streak, the candle formation for Nifty lacks conviction; hence, a cautiously optimistic approach is warranted, said Osho Krishan, Senior Analyst - Technical & Derivatives at Angel One in a note.

On the higher end, 25,500 - 25,600 is expected to pose a moderate challenge for the bulls in the near period. While on the lower end, 25,300 - 25,200 is expected to act as a buffer and could present an opportunity to strategically increase long positions in the Nifty, the analyst from Angel One added.

Following a similar trend, the Bank Nifty futures too edged 0.1 per cent up amid a 3.7 per cent dip in OI. The premium remained steady around 107 points.

The dip in OI - both in Nifty and Bank Nifty - although marginal can be attributed to traders lighting up positions ahead of the key US Fed policy outcome tonight.

Technically, the Bank Nifty sustained above the cup-and-handle breakout level of 51,750, indicating potential strength, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates in a note.

Therefore, the 51,700 – 51,750 zone will act as immediate support for Bank Nifty in the short term. If the index holds the 51,700 support, it could test levels of 52,800 – 53,000 in the short term, the analyst from Asit C. Mehta added.

Echoing similar views, Om Mehra, Technical analyst at SAMCO Securities said the Bank Nifty remains above the 61.8 per cent Fibonacci retracement level. The 20-DMA has crossed above the 50-DMA, forming a bullish crossover, suggesting that the positive momentum will likely persist.

The analyst also highlighted that - the India VIX had dropped to 12.59, its lowest point this month, and a spike above 14, which could introduce minor weakness and signal caution for the next session.

Key Insights from Nifty, Bank Nifty options data:

The Nifty PCR for the September 19 expiry stands above 1; showing higher open positions in Puts versus Calls. This also implies presence of higher Put Writers versus Calls, thus a likely positive bias for the market.

Among Calls, highest OI (open interest) stands at 26,000 Call with active trading seen in followed by 25,500 and 25,400. Active trading was seen in 25,400 - 25,800 Calls. The premium action suggests that consistent trade above 25,550 can trigger some short-covering.

On the other hand, highest OI in Puts stands at 25,000 Strike followed by 25,200. Data shows, that the support at 25,300 holds the key for the present positive sentiment.

Similarly, the Bank Nifty PCR also stands above 1. The contract which expires today, has seen aggressive Call writing at 52,500 and 53,000 Strike Prices; considerable resistance for the Bank Nifty can be expected aroudn 52,350 - 52,450 levels, data shows.

Whereas, heavy Put writing at 52,000 indicated strong support for Bank Nifty 52,050 - 51,950 levels.

FII, DII trading activity in F&O - Here's all you need to know about who bought and who sold in the derivatives market on September 17?

As per data from the NSE, FIIs net bought 6,800 contracts of index futures on Tuesday worth Rs 425.94 crore. FIIs net bought 7,550 contracts of Nifty futures; while net sold 400 contracts of Bank Nifty futures and 490 contracts of MidCap Nifty futures.

In terms of change in open interest (OI); foreign investors increased the OI by 1.1 per cent on September 17, with noticeable OI addition in Bank Nifty futures - up 7.6 per cent.

Pursuant to which, FIIs long-short ratio in index futures inched higher mere 3 basis points (bps) to 2.14:1; indicating presence of more than 2 long positions in index futures for every short bet.

Meanwhile, retail investors' increased bets on the short side of trade as the long-short ratio dipped by 5 bps to 0.66:1; A total of 3,499 contracts were added on the short side of trade in index futures, while OI in long positions were reduced by 18,762 contracts.

Whereas, domestic institutional investors (DIIs) added a few long bets; but the overall long-short ratio still implies that DIIs hold near about 2 long positions for every 3 bets on the short side of trade.

Bullish & Bearish stocks

On Tuesday, Mahanagar Gas (MGL) and Hero MotoCorp saw substantial long build-up, as the stocks jumped 4.7 per cent and 3.2 per cent backed by a 20 per cent and 8.2 per cent increase in OI. 

On the other hand, stocks such as Gujarat Gas, Apollo Tyre, Ashok Leyland, Tata Chemicals and Piramal Enterprises (PEL) saw a dip in price alongside rise in OI; suggesting possible short build-up at these counters.

Stocks in F&O ban period on Wednesday

There have been 2 changes in the F&O ban stock list with Biocon and PNB coming in for Bandhan Bank and Chambal Fertilisers. The rest of the 8 are the same - Aarti Industries, Balrampur Chini, Birlasoft, GNFC, Granules India, Hindustan Copper, LIC Housing Finance and RBL Bank.