F&O Insights: FIIs up Nifty, Bank Nifty bullish bets; futures premium dip

Derivative market update for Wednesday, August 28: The Nifty September futures premium dipped from Rs 155 to Rs 116 yesterday; while, Bank Nifty futures premium declined to Rs 257 from Rs 328.

The Nifty on Tuesday ended higher for the ninth straight day and was seen quoting near its all-time high at 25,078. Yesterday the index came within reach of its peak, before paring gains and ending marginally higher at 25,018.

Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates believes that technically, the Nifty found resistance near its previous record high of 25,078 and witnessed profit booking, resulting in the formation of a small red candle on the daily chart.

Thus, 25,080 will act as a short-term hurdle for the index. If the index sustains above the 25,080-25,100 levels, the rally could extend towards the 25,300-25,500 levels, Hrishikesh said in a note.

 

Meanwhile, the premium in Nifty futures for the September series dropped sharply from Rs 155 to Rs 116. Similarly, premium in Bank Nifty September contract declined from Rs 328 to Rs 257 on Tuesday. This implies rollovers of positions at a lower cost compared to that of the previous trading session.

Key Insights from Nifty, Bank Nifty Options data:

The Nifty Put Call Ratio (PCR) for the August series stands at 1.11, suggesting higher open interest (OI) in Puts versus Calls.

The options market reflects a bullish sentiment, with more Puts being written than Calls as Nifty's trades in higher highs and lows structure, coupled with its position above key averages, align with this sentiment, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities in a note.

Significant open interest at the 25,000 Call (86.11 lakh contracts) and the 25,000 Put (93.78 lakh contracts) indicates a fierce battle between buyers and sellers, with notable activity around the 24,800-24,900 Puts and 25,100-25,200 Calls.

The Max Pain Point, concentrated at 24,950, marks a critical level that could influence the index's movement, Dhupesh added.

In case of Bank Nifty, significant open interest is observed at the 52,000 Call (42.41 lakh contracts) and the 51,000 Put (34.98 lakh contracts), with notable activity around the 51,300-51,500 Calls and 50,900-51,100 Puts.

The Put-Call Ratio (PCR) has increased from 0.76 on Monday to 0.84, reflecting a slightly sideways to bearish sentiment as the index lacks strong follow-up buying and trades largely sideways, keeping the bulls cautious.

The Max Pain Point, where the highest concentration of open options contracts is located, stands at 51,200, serving as a crucial reference point for the Bank Nifty's movement, the Samco note stated.

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 August 27?

As per data from the NSE, FIIs net bought 28,076 contracts of index futures on August 27 for a consideration of Rs 2,058.26 crore. FIIs net bought 7,424 contracts of Nifty futures, while bought 20,506 contracts of Bank Nifty futures and 419 contracts of MidCap Nifty futures.

Pursuant to which, FIIs long-short ratio in index futures rose to 1.36:1 – this ratio implies that foreign investors now hold near about 3 long positions in index futures for every 2 bets on the short side of trade. The FIIs longs in index futures now stand at 57.63 per cent.

Data shows that FIIs were net buyers across key index futures - Nifty futures (7,424 contracts), Bank Nifty futures (20,526 contracts) and MidCap Nifty futures (419 contracts).

Meanwhile, domestic institutional investors (DIIs) continue to hold near about 2 short positions for every long open position in index futures. DIIs index futures long-short ratio rose marginally to 0.57:1; with net longs at 36.30 per cent.

Retail traders long-short ratio stood at 1, showing equal amount of long and short positions. Their net longs in index futures stood at 50.04 per cent.

Bullish & Bearish stocks

Energy & Finance related shares led by REC and PFC were the top gainers on Tuesday. Both the stocks gained around 4 per cent each, with 78 per cent and 49 per cent buildup in open interest (OI) for the September series. Indian Energy Exchange (IEX) was the other prominent gainer.

Among others, Cholamandalam Investment and Finance Company, ICICI Prudential Life Insurance, Aarti Industries, Muthoot Finance, Birlasoft and Sun TV were the other significant winners yesterday.

On the flip side, Cummins India, Titan and Syngene International dropped around 2.5 per cent each. JSW Steel, Bharat Forge, United Spirits, Bharat Electronics, Persistent Systems, Hindustan Unilever and JSW Steel also declined around 2 per cent each.

Stocks in F&O ban period

Only 4 out of the 181 derivatives stocks traded in the August series are placed in the F&O ban period on Wednesday. 

Balrampur Chini, Birlasoft, Hindustan Copper and India Cements are the 4 stocks in F&O ban today. Please remember, India Cement will be removed the F&O list with effect from the September series.

Traders are not allowed to take new positions in stocks placed under the F&O ban. Traders are permitted to only exit existing open positions. In case, any new position is opened during the ban period, exchange levies a penalty on every such trade.

As and when the open interest in the stock falls below 80 per cent of the market wide limit, the stock shall be removed from the ban period.