Nifty options paint bearish trend, while Bank Nifty bullish: F&O experts

F&O cues for Nov 06: The Nifty options data reflects a cautious outlook, with call writing significantly outpacing put activity, says Dhupesh Dhameja of SAMCO Securities.

Futures & Options (F&O) Insights for Wednesday, November 06: The NSE Nifty 50 index logged its biggest single-day gain in nearly two months on Tuesday amid the sharp recovery from lower levels. The Nifty ended 0.9 per cent higher at 24,213, while the November Nifty futures gained 0.8 per cent at 24,295 - thus implying a premium of 82 points. The premium was down 37 points when compared to its previous trading session.

 

Technically, the Nifty formed a piercing line candle on the daily chart around the 150-day exponential moving average (DEMA) support, indicating strength, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.

 

 

According to the piercing line candlestick pattern, if the Nifty crosses 24,320, the short-term pullback rally may extend to 24,500 - 24,600 levels. The short-term trend is down, but as long as 23,890 support holds, a relief rally may be feasible, the analyst said.

 

The Bank Nifty futures surged 1.6 per cent while the open interest declined over 9 per cent and premium declined to 187 points. 

 

The Bank Nifty formed a bullish engulfing candlestick pattern on daily chart, indicating strength. As per this pattern, as long as index holds 50,865, relief rally will continue. On the upside, recent swing high is placed near 52,580, which will act as resistance for Bank Nifty, Hrishikesh explained.

 

Key Insights from Nifty, Bank Nifty options data

 

The Nifty options data reflects a cautious outlook, with call writing significantly outpacing put activity, indicating a bearish stance. Strong resistance from call writers (Bears) in the 24,200–24,500 area contrasts with solid support around 23,800–24,100, reflecting a shift in resistance to lower levels amid bearish sentiment, said Dhupesh Dhameja, Technical Analyst, SAMCO Securities.

 

Elevated call writing within this resistance zone suggests increased confidence among sellers, while put unwinding indicates a strengthening bearish outlook. The Put-Call Ratio (PCR) has dipped from 0.79 to 0.67, reinforcing the cautious sentiment. The 'max pain' level is situated at 23,900, explains Dhupesh.

 

In case of Bank Nifty, the options data reflects a positive sentiment, with aggressive put writing overshadowing call activity. The PCR has risen from 0.68 to 1.05, bolstering the bullish outlook as put writers gain dominance. The 'max pain' level currently sits at 52,000, positioning this as a critical point that could shape near-term trend, Dhupesh added.

 

FII v/s Retail v/s Proprietary traders: Who is bullish/ bearish?

 

Foreign institutional investors (FIIs) were net buyers of index futures worth Rs 812.31 crore on Tuesday. They net bought 11,001 contracts of Bank Nifty futures to the tune of Rs 866.72 crore, and 1,329 contracts of MidCap Nifty futures for Rs 82.32 crore. FIIs, however, net sold 1,800 contracts of Nifty futures for Rs 107.43 crore.

 

The NSE F&O data shows that the FIIs open interest (OI) in Nifty futures rose more than 7 per cent amid the net sales, thus indicating at likely additional short build-up in Nifty futures. Whereas, Bank Nifty may have seen some long build-up and some short covering in the MidCap Nifty futures.

 

Pursuant to which, FIIs long-short ratio in index futures rose by another 5 basis points (bps) to 0.36. This ratio still implies that FIIs hold near about 3 short positions in index futures for every bullish bet.

 

Meanwhile, retail investors' continue to hold bullish bets in index futures, in the ratio of almost 2:1 - meaning 2 long trades for every short position. Proprietary traders, like the FIIs, are tilted towards the bearish side, with 2 short bets for every bullish position.