F&O Insights: Experts advocate some caution; 4 stocks in F&O ban

Derivatives market update for Sept 05: The Put-Call Ratio dropped from 0.96 to 0.82, reinforcing the dominance of call writers and a cautionary trend; 25,150 remains a key level for the Nifty, says Dh

F&O Cues for Thursday, September 05, 2024: Equity market witnessed profit-taking yesterday in sync with global peers. In the process, the NSE Nifty snapped its record 14-day winning streak; wherein the Nifty had rallied non-stop 1,141 points.

The Nifty September futures on Wednesday ended 0.4 per cent lower to 25,248, while the premium dipped to 49 points. The September contract saw 1.2 per cent rise in open interest (OI).

Technically, the daily chart the Nifty 50 index depicts a bullish belt hold candle at the breakout point of a rounded bottom pattern, indicating strength. On the downside, the 9-Day Exponential Moving Average (DEMA) is positioned near 25,090. As long as the index holds above the 25,000-25,100 levels, a 'buy on dips' strategy should be employed. On the upside, the index may test the 25,500-25,600 levels in the near future, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates Ltd in a note.

 

Meanwhile, the Bank Nifty September futures also declined 0.4 per cent alongside a 2 per cent rise in OI. The premium, however, rose to 207 points as against 145 points the day before.

In case of Bank Nifty, as long as the index remains above 51,060, a 'buy on dips' strategy is recommended. On the upside, the Bank Nifty might attempt to test the levels of 52,000, which correspond to the double bottom pattern target, Hrishikesh added.

Key Insights from Nifty, Bank Nifty Options data:

The Nifty options market indicates a bearish bias, with a noticeable increase in call writing over the past three sessions, a negative sign for the index. Significant open interest is concentrated at the 25,000 Put (1.01 crore contracts) and the 25,300 Call (1.03 crore contracts), signalling strong resistance, as call writers adjust to lower levels, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities in a note.

The Put-Call Ratio (PCR) has dropped from 0.96 on Monday to 0.82, reinforcing the dominance of call writers and a cautionary trend. The Max Pain Point at 25,150, this is a key level to watch for near-term Nifty movement.

In case of the Bank Nifty, the options market shows significant open interest at the 51,400 Call (1.41 crore contracts) and the 51,300 Put (86.26 lakh contracts).

Active trading has also been observed around the 51,500-51,600 Calls and 51,200-51,300 Puts. The Put-Call Ratio (PCR) has edged up from 0.85 to 0.88, reflecting a sideways to bearish sentiment.

The Bank Nifty has been stuck in a tight 51,500-51,000 range over the past four sessions, leading to muted momentum. The Max Pain Point at 51,400 will be a critical level to watch for any potential shifts in market direction, Dhupesh added.

In other news, the Securities and Exchange Board of India (Sebi) is likely to notify stricter derivatives trading norms in the interest of retail investors soon. According to the sources, the regulator has provisions to issue the final norms without presenting the proposals to the board for approval. READ MORE

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 04?

As per data from the NSE, FIIs net sold 18,740 contracts of index futures on Wednesday for a consideration of Rs 1,333.46 crore. FIIs net sold 7,636 contracts of Nifty futures, 10,474 contracts of Bank Nifty futures and 658 contracts of MidCap Nifty futures.

FIIs were net sellers in Nifty futures for the third straight day on September 04. Thus, liquidating near about a third of new positions added in the preceding two trading sessions. Foreign investors net sold Bank Nifty futures for the first time in five trading sessions amid the weekly options expiry.

Pursuant to which, FIIs long-short ratio in index futures dipped to 2.2:1 – this ratio implies that foreign investors hold more than 4 long positions in index futures for every 2 bets on the short side of trade. The FIIs longs in index futures stood at 68.39 per cent as of yesterday.

At the same time, retail investors exited some of their short positions, as the index long-short ratio rose to 0.74 from 0.68 the day before. Retail investors held 42.5 per cent positions on the long side in trade. 

Meanwhile, domestic institutional investors (DIIs) positions in index futures remain unchanged at 0.7; with net longs at 40.8 per cent. 

Bullish & Bearish stocks

Berger Paints saw long additions as the stock surged 3.6 per cent on the back of 9.9 per cent rise in its open interest (OI). JK Cements, IndiaMart InterMesh, Biocon and Pidilite Industries also witnessed long buildup on Wednesday.

On the other hand, Tata Chemicals saw addition of short positions as the stock slipped 2.5 per cent alongside a 9.8 per cent increase in the OI. RBL Bank, Wipro, ABB India and Coal India were few of the other prominent stocks to register a dip in share price accompanied with rise in OI yesterday.

Stocks in F&O ban period

Aditya Birla Fashion & Retail, Balrampur Chini, Hindustan Copper and RBL Bank are the 4 stocks placed under the F&O ban period today.