Nifty to gain upside momentum above 25,500; MphasiS, OFSS see short buildup

Derivatives market update for Sept 19: Options data hint that short term support for Nifty is at 25,250; while upside momentum is expected above 25,500, says Sahaj Agarwal of Kotak Securities.

F&O Insights for Thursday, September 19, 2024: Equity market in India started Thursday's trading session on a positive note following the 50 basis points rate cut in the US. The BSE Sensex was up 550 points at 83,500, and the NSE Nifty 50 index had surged past the 25,500 level for the first-ever time.

The US Federal Reserve cut interest rates for the first time since March 2020. In its statement, the Federal Reserve noted, "Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have slowed, but the unemployment rate remains low. Inflation has progressed toward the Committee's 2 per cent objective but is still somewhat elevated".

 

On Wednesday, the Nifty hit a fresh all-time high at 25,482, but retreated and closed in red at 25,378. The Nifty September futures dipped 0.2 per cent, as the premium declined to 18 points from 31 points and the open interest (OI) decreased by 3.4 per cent or 18,808 contracts mainly on account of unwinding of short positions by retail investors.

Technically, the Nifty formed a spinning top candle on a daily scale near its all-time high, signalling some short-term hesitation, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates in a note.

Therefore, on the upside, 25,500 will act as an immediate hurdle for Nifty. If the index sustains above 25,500, it could test the 25,600 levels. On the downside, 25,280 - 25,300 serves as immediate support base for Nifty followed by 21-DEMA support, which is placed near 25,080 levels, the analyst added.

In contrast, the Bank Nifty which was the key outperformer yesterday, the futures ended 0.9 per cent higher. However, the premium shrunk to mere 7 points from 107 points, and the OI declined by 5 per cent.

The Bank Nifty formed a strong bullish candle on a daily scale, indicating strength. However, it will encounter short-term resistance near the psychological level of 53,000. If Bank Nifty sustains above this level, the rally could extend toward 53,500 - 53,800, Hrishikesh Yedve said.

Key Insights from Nifty, Bank Nifty options data:

Open interest build-up is seen at 25,000 Put and 26000 Call for the weekly and monthly expiry. Short term support is placed at 25,250 while upside momentum is expected above 25,500 for a target of 25,700 - 26,000 on the higher side. If Nifty fails to sustain above 25,250, the next monthly support level is placed only at 24,750, said Sahaj Agarwal, Senior Vice President, Head of Derivatives Research at Kotak Securities in a note.

The Nifty options data reflects a neutral stance, with balanced call and put writing. Traders seem to be awaiting a decisive move beyond 25,550 or below 25,300, said Dhupesh Dhameja, Technical Analyst at SAMCO Securities in a note.

Significant open interest is observed at the 25,000 Put (71.84 lakh contracts) and 26,000 Call (1.05 crore contracts), reflecting a 'buy on dips' sentiment. Put writers are defending lower levels, while call writers have adjusted to higher strikes.'

The most active trading is seen in 25,400 - 25,500 Calls and 25,200 - 25,300 Puts. The Put-Call Ratio (PCR) dropped to 0.90 from 0.98, indicating a shift from bullish to sideways sentiment as both call and put writers balance their positions. Max Pain stands at 25,300, signalling this as a key pivot level for upcoming market moves, Dhupesh highlighted.

In case of Bank Nifty, significant open interest is focused on the 52,800 Call (1.28 crore contracts) and 52,700 Put (97.35 lakh contracts), indicating a tug-of-war between call and put writers, with 52,800 emerging as a key resistance point.

Active trading is concentrated around the 52,900 - 53,000 Calls and 52,500 - 52,600 Puts. The Put-Call Ratio (PCR) has risen from 1.01 to 1.15, signalling bullish sentiment as put writers gain control. The Max Pain point is at 52,700, a crucial level for potential market shifts, the note from Samco Securities 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 18?

As per data from the NSE, FIIs net bought 17,235 contracts of index futures on Wednesday for a consideration of Rs 1,418.93 crore. FIIs were net sellers of 3,249 contracts in Nifty futures and 350 contracts of MidCap Nifty futures; while net purchased 20,754 contracts of Bank Nifty futures.

At the end of Wednesday, FIIs total open interest (OI) in index futures rose by 4 per cent or 24,199 contracts to 6,29,415 contracts. Foreign investors added 3,553 contracts in Nifty futures, and about 21,138 contracts in Bank Nifty OI.

Pursuant to which, FIIs long-short ratio in index futures increased to 2.21:1 – this ratio implies that foreign investors hold more than 2 long positions in index futures for every bet on the short side of trade. The FIIs longs in index futures stood at 68.87 per cent as of September 18.

Meanwhile, retail investors' long-short ratio in index futures dipped by 5 basis points (bps) to 0.61:1. Retail investors reduced longs in index futures by 31,426 contracts, cut shorts by 16,904 contracts. Their net long in index futures now stands at 37.87 per cent.

On the other hand, domestic institutional investors (DIIs) added a few longs in index futures even as the long-short ratio moved 1 bps higher to 0.67. DIIs net longs in index futures rose to 40.07 per cent from 39.65 per cent the day before.

Bullish & Bearish stocks

Coromandel International seems to be the only stock with some long build-up yesterday. The stock was up 1 per cent, and has gained 2.2 per cent in the last four trading sessions. The OI saw a 2.5 per cent rise on Wednesday, and has increased by 10 per cent in the last 4 days.

On the other hand, MphasiS and OFSS witnessed significant build-up of short positions on Wednesday. The former stock plunged 5.3 per cent with a 15 per cent surge in OI; while the latter tumbled 8.6 per cent on the back of 10 per cent increase in OI. Apollo Tyres and Ashok Leyland saw shorts added for the second straight day.

Stocks in F&O ban period on Thursday

There was only one change in the F&O ban list as OFSS stock replaced Hindustan Copper. The rest of the 9 stocks remained the same - Aarti Industries, Balrampur Chini, Biocon, Birlasoft, GNFC, Granules India, LIC Housing Finance, PNB and RBL Bank.