F&O Insights: Bulls take charge as Nifty, Bank Nifty PCR jumps over 1

Derivatives market update for Sept 13: Data shows FIIs added fresh longs in Nifty futures, while covering some shorts in Bank Nifty; Retail, DIIs up short bets. Analysts upbeat on near-term outlook.

F&O Insights for Friday, September 13, 2024: A day after the NSE Nifty 50 index registered its biggest single-day net gain since June 05, 2024, the focus will be on the follow-up trade action by the FIIs and retail investors, who seem to be on opposite side of camp.

On Thursday, the Nifty surged nearly 2 per cent or 471 points, while the Nifty September futures gained 1.7 per cent on the back of 9.9 per cent rise in open interest (OI), mostly additional long buildup by foreign investors.

Incidentally, amid the sharp rally in the last hours of trade yesterday the Nifty futures began trading at a discount compared to the spot value; thus registered a lower net gain for the day. Nifty futures ended at a 33 points discount as against a 20 points premium the day earlier.

 

Commenting on the Thursday's trading action, Rajesh Bhosale, Equity Technical Analyst at Angel One said amid an impressive weekly Nifty options expiry the bears were caught off guard.

The Nifty has confirmed a higher bottom at 24,750, and by setting a new all-time high, it continues its 'Higher Top Higher Bottom' formation. Last week's bearish engulfing pattern has now been invalidated, and the price action suggests that corrections are becoming shorter, reflecting the strength of the bull market, Rajesh Bhosale added.

Going forward, support levels have shifted higher to 25,200 - 25,000, while the higher bottom at 24,750 is now critical for sustaining this rally. In uncharted territory, immediate resistance is expected at 25,500 - 25,600, which aligns with the upper range of the rising trend line, followed by retracement resistance at 25,800, the analyst from Angel One stated in a note.

Meanwhile, the Bank Nifty futures jumped 1.2 per cent while the OI declined by 11.3 per cent; suggesting possibility of some short unwinding. The Bank Nifty futures also ended at a discount of 13 points compared to a premium of 114 points the day before.

Jatin Gedia, Technical Research Analyst at Sharekhan by BNP Paribas in a note said, the Bank Nifty also broke out of a consolidation on the upside and has started it upmove towards 52,000 – 52,500. Prices are sustained above key daily moving averages, which is a sign of strength. 

Key Insights from Nifty, Bank Nifty options data:

In Nifty options, a bullish bias has emerged in the options market, marked by increased put writing over call writing, breaking the 10-day streak of call writer dominance, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities in a note.

Significant OI is noted at the 25,000 Put (1.37 crore contracts) and 25,400 Call (2.04 crore contracts), reflecting a strong bullish sentiment. Call writers unwound positions at lower levels, while active trading is now centred around the 25,450-25,500 Calls and 25,300-25,350 Puts. The Put-Call Ratio (PCR) surged to 1.08 from 0.60, indicating a bullish market environment, as put writers took control, Dhupesh Dhameja added.

India VIX dropped 3.27 per cent, closing at 13.18, down from 13.62 in the previous session. The continued fall in VIX, now below 15, suggests strengthening bullish momentum with growing buyer interest.

In case of Bank Nifty, significant OI is concentrated at the 52,000 Call (16.55 lakh contracts) and 51,000 Put (18.90 lakh contracts), reflecting a bullish outlook as call writers shifted their positions higher.

Active trading is focused around the 51,800-51,900 Calls and 51,500-51,600 Puts. The Put-Call Ratio (PCR) surged from 0.84 to 1.23, signalling strong bullish sentiment with put writers gaining control. The Max Pain point remains at 53,000, a critical level for potential market shifts, the analyst from Samco Securities added.

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 12?

As per data from the NSE, FIIs net bought 39.349 contracts of index futures on Thursday for a consideration of Rs 2,579.61 crore. FIIs net bought 32,339 contracts of Nifty futures, 5,963 contracts of Bank Nifty futures and 390 contracts of MidCap Nifty futures.

FIIs increased long bets in Nifty futures by 14.8 per cent as the OI increased by 57,545 contracts yesterday. At the same time, some unwinding of shorts was noted in Bank Nifty and MidCap Nifty futures.

Pursuant to which, FIIs long-short ratio in index futures jumped to 1.9:1 – this ratio implies that foreign investors hold nearly 2 long positions in index futures for every bet on the short side. The FIIs longs in index futures stood at 65.52 per cent as of September 12.

Meanwhile, retail investors' increased shorts in index futures as the long-short ratio fell to 0.77:1. A total of 29,667 contracts of index futures were added on the short side of trade, while longs declined by 20,657 contracts.

Similarly, domestic institutional investors (DIIs) too upped bets on the short side with the long-short ratio slipping to 0.53:1; suggesting almost 2 short positions for every long in index futures.

Bullish & Bearish stocks

Page Industries added bullish bets for the second straight day on Thursday, as the stock rose another 3.2 per cent backed by 12.4 per cent increase in the open interest. Can Fin Homes, Bajaj Auto, Bharti Airtel and Hindustan Unilever are the few other key movers on the positive side of trade on Thursday.

On the flip side, Granules India saw over 107 per cent surge in OI while the stock price plunged 16.3 per cent, indicating buildup of short positions at the counter.

Stocks in F&O ban period on Friday

Following the huge surge in OI, Granules India has entered the F&O ban period today. Others such as Aarti Industries, Aditya Birla Fashion & Retail, Balrampur Chini, Bandhan Bank, Chambal Fertilisers, Hindustan Copper and RBL Bank continue to remain in the F&O ban period; thus taking the total count up to 8 stocks.