FIIs up long bets in Nifty, long-short ratio hops to 3:1; retail add shorts

Derivatives market update for Sept 23: FIIs net bought over 1 lakh contracts of Nifty futures and 25,878 contracts of Bank Nifty futures on Friday. Retail investors hold 2 shorts for every long bet.

F&O Insights for Monday, September 23, 2024: The NSE Nifty 50 index has rallied over 2 per cent thus far in September, with the momentum picking up in last week following the bumper US Fed rate cut. 

Amid the bull-run, foreign institutional investors (FIIs) seemed to have been well positioned to benefit from the rally given the average long-short ratio of around 2 in index futures throughout the month of September. On Friday this ratio jumped to over 3 as FIIs added fresh aggressive long bets in Nifty and Bank Nifty, while retail investors are seen holding significant short positions.

 

On Friday, the Nifty September futures rallied over 1 per cent, while the OI dipped by 5.5 per cent as traders shifted bets to October series. The September futures ended at a discount of 24 points to the spot Nifty which closed at 25,791.

Technically, the Nifty settled above the previously formed doji, indicating strength. Thus, ongoing bullish momentum is like to take Nifty towards 25,900-26,000 levels, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates in a note.

On the upside, 26,000 will act as an immediate hurdle for Nifty. On the downside, 25,500 will serve as an immediate support for Nifty followed by 15-DEMA support, which is placed near 25,300 levels, the analyst said. 

Echoing a similar view, Osho Krishan, Senior Analyst - Technical & Derivatives at Angel One said, given the ongoing momentum, there is a possibility that 25,900 - 26,000 could be considered as potential target levels for Nifty this week.

Meanwhile, the Bank Nifty ended higher for the seventh straight day on Friday. The index rallied 1.4 per cent, while September futures advanced only 0.7 per cent as the contract traded at a steep discount of 242 points as against a premium of 140 points in preceding session. 

Technically, the Bank Nifty has given a breakout to a fresh rounding bottom pattern. According to the rounding bottom pattern breakout the index can test the levels of 57,000 in medium term, said Hrishikesh Yedve.

However, in short term Bank Nifty will face resistance near 55,000 levels. On the downside, the breakout level near 53,350 and the psychological level of 53,000 will serve as support points.

Key Insights from Nifty, Bank Nifty options data:

The options market reflects a bullish sentiment, characterized by heavier put writing compared to call writing. Significant open interest is noted at the 25,500 put (76.37 lakh contracts) and the 26,000 call (63.78 lakh contracts). 

This unwinding of call positions at lower strikes, coupled with the addition of put positions, creates a positive market structure, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities.

The most active trading has been in the 25,800 - 25,900 calls and 25,600 - 25,700 puts. The put-call ratio (PCR) has surged to 1.48 from 0.78, indicating a strong bullish tilt as put writers gain dominance. Max pain is positioned at 25,750, marking a key pivot level for future market movements, the analyst highlighted.

In case of Bank Nifty, significant open interest is observed at the 54,000 call (22.97 lakh contracts) and the 53,000 put (24.40 lakh contracts). Active trading is concentrated around the 53,500 - 53,600 calls and the 53,300 - 53,400 puts, reflecting a strong bullish bias, the analyst from SAMCO Securities said.

Call writers are reducing and shifting their positions to higher levels, while put writers are aggressively increasing their bets, indicating a bullish structure. The 54,000 level is emerging as a key resistance. 

The put-call ratio (PCR) has surged to 1.48 from 0.95, showcasing a strong bullish sentiment as put writers gain dominance. Max pain stands at 54,000, marking a critical pivot point for potential market shifts, the 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 September 20?

As per data available from the NSE, FIIs net bought 1,35,601 contracts of index futures on Friday for a consideration of Rs 9,144.57 crore. FIIs net bought 1,10,626 contracts of Nifty futures worth Rs 7,128.20 crore; and purchased 25,878 Bank Nifty futures to the tune of Rs 2,078.80 crore, while net sold 1,913 contracts of MidCap Nifty futures.

Backed the aggressive buying, FIIs overall open interest (OI) in index futures increased by 9.9 per cent to 6.92 lakh contracts - off which 73 per cent of the positions were in Nifty futures alone, whereas Bank Nifty accounted for near 18 per cent OI.

Pursuant to which, FIIs long-short ratio in index futures soared over 3:1; this implies foreign investors now hold more than 3 long positions in index futures for every bet on the short side.

Meanwhile, retail investors' increased bets both on the short sides, with net sales of more than 1 lakh contracts. The long-short ratio plunged to 0.50 from 0.64 the day before. This ratio now implies that retail investors now hold 2 short positions in index futures for every bet on the long side. 

Whereas, domestic institutional investors (DIIs) continued to hold near about 2 long positions for every 3 bets on the short side of trade.

Bullish & Bearish stocks

ICICI Bank saw significant long additions on Friday, as the stock gained 2.2 per cent on the back of 10.2 per cent increase in OI. Larsen & Toubro, Hindustan Unilever and Bosch also saw some long build-up.

On the other hand, Grasim was the only stock to witness some shorting activity, as the stock declined 2.2 per cent along with a 4.5 per cent increase in OI.

Stocks in F&O ban period on Monday

A total of 11 stocks are placed under the F&O ban today - Aarti Industries, Biocon, Chambal Fertilisers, GNFC, Granules India, LIC Housing Finance, National Aluminium, OFSS, PNB, RBL Bank and SAIL.