F&O Insights: IPCA, Divis Lab see bullish bets; 24,700 the key for Nifty

Derivatives market update: 12 stocks including Balrampur Chini, GNFC, India Cement, LIC Housing and National are in F&O ban on Thursday; 2 stocks see buildup up short positions; details here

The Nifty futures added another 0.4 per cent in trades on Wednesday as they settled at 24,798 levels. The August month futures premium shot up to 28 points from 12 points the day before. Trading volumes were below average, with around 1.19 lakh contracts traded on Wednesday as against the last 7-day average volume of around 2.31 lakh contracts. 

The overall open interest (OI) in Nifty August futures declined by 0.5 per cent (2,175 contracts); while it rose by 12.3 per cent (8,368 contracts) in the September series compared to the previous trading session.

Meanwhile, the Bank Nifty futures ended 0.2 per cent lower yesterday, while the OI dipped by 1.9 per cent (3,503 contracts) in the August series. At the same time, OI rose by as much as 18.6 per cent in the September series, suggesting possible buildup of short positions there.

 

Overall, in the last four trading sessions, the Nifty and Bank Nifty have gained 2.6 per cent and 1.7 per cent, respectively, alongside a 7 per cent and 19.7 per cent drop in the OI, partly as we near the August-month expiry.

Today, will be the weekly Nifty options expiry.

Axis Securities in their weekly Nifty options strategy, recommends buying Nifty 25,000 Call in the price range of Rs 140 - 150, and simultaneously selling 25,100 Call in the range of Rs 40 - 50.

The break-even point for this strategy would be Rs 24,90o; with a risk of Rs 2,500 and reward of Rs 5,000 per Lot.

Nifty, Bank Nifty Options Insights

The Nifty options data signals a bullish sentiment, with more Put writing than Calls as the index maintains its strong bullish structure. Significant open interest is observed at the 25,000 Call (1.2 crore contracts) and the 24,500 Put (80.33 lakh contracts), with notable activity around the 24,600-24,700 Puts and 24,800-24,900 Calls.

The Nifty Put-Call Ratio (PCR) has slightly decreased from 1.13 on Tuesday to 1.10, still indicating positive sentiment as it remains above 1. The Max Pain Point, where the most open options contracts are, is at 24,700, serving as a key level influencing the Nifty's movement, says Dhupesh Dhameja, Technical Analyst, SAMCO Securities in a note.

On the Bank Nifty, there is notable open interest at the 50,700 Call (1.09 crore contracts) and the 50,600 Put (67.43 lakh contracts), with significant activity around the 50,800-50,900 Calls and 50,500-50,400 Puts.

The Bank Nifty PCR has declined from 1.03 on Tuesday to 0.78, suggesting a slightly sideways sentiment as the index struggles to sustain above its trading range. The Max Pain Point, where the highest concentration of open options contracts is found, is at 50,700, Dhupesh added.

On the contrary, Aditya Agarwal, Head of Derivatives & Technical at Sanctum Wealth believes that the Nifty PCR is moving towards an overbought territory and is indicating some cautiousness in near future.

Options data for August expiry indicates a range of 24,500-25,000 for the next few sessions as the overall short-term structure for Nifty remains bullish. However, on the lower side a close below 24,500 can negatively impact the sentiment, and the Nifty could gradually correct towards 24,360 / 24,140 levels.

Nifty Bank is continuously witnessing profit booking pressure at higher levels and has underperformed broader indices in last few weeks. On higher side, Nifty bank has stiff resistance between 50,800-51,200 and only a close above 51,200 will change short term outlook on the Index, Aditya said in a note. However, a close above 51,200 will trigger a sharp short covering move and in that scenario Nifty Bank can move towards 52,000/52,600 levels, he added.

FII, DII trading activity in F&O - Here's all you need to know about who bought and who sold on August 21?

As per data from the NSE, FIIs net sold 8,466 contracts of index futures on August 21 for a consideration of Rs 727.93 crore yesterday. FIIs were net buyers of 3,774 contracts of Nifty futures, while sold 14,564 contracts of Bank Nifty futures.

Pursuant to which, FIIs long-short ratio in index futures eased a wee bit to 1.07:1 – this ratio implies that foreign investors still hold more than 1 long position in index futures for every single bet on the short side of trade. The FIIs longs in index futures now stand at 51.63 per cent.

Data shows that FIIs added some fresh short positions in Bank Nifty futures, while remain in neutral mode on the Nifty futures. 

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 stands at 0.55:1; with net longs at 35.41 per cent.

Retail traders long-short ratio remained steady around 1.1:1, with additions seen both on the long and short side of trade. Retail traders net long in index futures stand at 52.89 per cent.

Bullish & Bearish stocks

On Wednesday, IPCA Labs saw fresh long buildup with the stock future rising by 1.6 per cent, and OI seeing 14.5 per cent addition in the August series. Similarly, HPCL (up 2.8 per cent), Divis Lab (up 3.9 per cent), SBI Life (up 2.2 per cent) and Chambal Fertilisers (up 3.6 per cent) saw additions of new long positions.

On the other hand, Dr Lal PathLabs and UltraTech Cement saw some amount short buildup. The former was down 1.3 per cent on addition of 7.9 per cent new positions, while the latter dipped 1.2 per cent alongside 3 per cent OI buildup.

chart

What is long and short buildup? 

In general, a rise in stock price alongside an increase in open position is considered as buildup of long positions. Whereas, on the other hand, a decline in stock price with a rise in OI is considered as buildup of short positions.

Stocks in F&O ban period

A total of 12 stocks out of the 181 in the futures & options segment are placed in the F&O ban period on Thursday. 

Aarti Industries, Aditya Birla Fashion Retail, Balrampur Chini, Birlasoft, GNFC, Granules India, Hindustan Copper, India Cement, LIC Housing Finance, National Aluminium, Piramal Enterprises and Sun TV are the 12 stocks in F&O ban today.

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.