Futures & Options (F&O) Insights for Friday, October 04, 2024: Equity market fell sharply on Thursday amid concerns over the rising conflicts in Israel-Iran. The OI (open interest) in Nifty futures declined by 8 per cent as the underlying index dropped over 2 per cent. The premium for the October series, however, rose to 225 points as against 172 points the day before.
The sell-off is expected to continue, with the next key support at the 50-EMA, around the 25,050 – 25,000 zone. If this level is breached, prices could fall further toward the September swing low of 24,750, said Rajesh Bhosale, Equity Technical Analyst at Angel One.
A continuous linear decline is unlikely due to oversold conditions, so any bounce should be used to reduce long positions. In this scenario, immediate resistance is seen around 25,500, followed by the bearish gap at 25,750, the analyst added.
Meanwhile, the Bank Nifty futures also declined nearly 2 per cent amid a near 90-point rise in premium to 540 points. The Bank Nifty OI, however, increased by 24 per cent.
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 Thursday amid the massive over 2 per cent Nifty fall.
Foreign institutional investors (FIIs) were aggressive sellers yesterday. As per data available from the NSE, FIIs net sold 1,55,282 contracts of index futures on October 03 for a consideration of Rs 10,634.60 crore. FIIs net sold 1,07,324 contracts of Nifty futures worth Rs 6,861.29 crore; 47,170 contracts of Bank Nifty futures worth Rs 3,723.08 crore and 216 contracts of MidCap Nifty futures.
On Thursday, FIIs did significant long unwinding in index futures. Their long-short ratio in index futures dropped from 3.9:1 to 2:1. This ratio now implies that FIIs now hold 2 long positions for every short bet as against 4 bullish bets for every short trade earlier.
The National Stock Exchange (NSE) data shows that, FIIs pared near about 15 per cent open positions in Nifty futures – clearly indicating long unwinding; the Bank Nifty open interest (OI) rose by 56.6 per cent – suggesting possible fresh short build-up, while the OI in MidCap Nifty futures declined by 1.6 per cent. FIIs overall OI in index futures was down 7.5 per cent.
Meanwhile, retail investors’ covered a bulk of their short bets in index futures. Their long-short ratio jumped to 0.9:1 from 0.6:1; this implies that retail investors now hold near about 1 long bet in index futures for every single bet on the short side of trade.
Whereas, domestic institutional investors (DIIs) long-short ratio in index futures remained steady at 0.60; meaning 2 long positions for every 3 short bets.
Proprietary traders also covered some of their short positions; the long-short ratio now stands at 0.5:1. This ratio implies that proprietary traders hold 2 short positions in index futures for each long position.
Key Insights from Nifty, Bank Nifty options data
Bearish sentiment is dominating the Nifty options market, with call writing exceeding put writing for the third consecutive session amid rising global tensions. Heavy open interest is concentrated at the 25,300 call (3.63 crore contracts) and the 25,250 put (3.71 crore contracts), while the 26,000 strike acts as key resistance, said Dhupesh Dhameja, Derivatives Analyst at SAMCO Securities in a note.
Increased put activity in the 25,300 – 25,200 indicates a shift in call writers’ positioning to lower levels, while put unwinding shows growing bearish momentum. The put-call ratio (PCR) has dropped to 0.57 from 0.77, reinforcing bearish control, the note stated.
India VIX spiked 9.86 per cent, closing at 13.17. However, as long as VIX remains below 15, a potential recovery in bullish momentum is still on the table, as lower volatility typically supports buying interest, Dhupesh Dhameja explained.
In case of Bank Nifty, significant open interest is seen at the 53,000 call (22.74 lakh contracts) and the 52,000 put (13.51 lakh contracts), with concentrated trading between 52,200 – 52,300 calls and 51,900 – 52,000 puts. This points to a mildly bearish sentiment as call writers place resistance at 52,500 – 53,000.
Increased put activity between 52,200 – 52,300 indicates a shift in call writers’ positioning to lower levels, while put unwinding shows growing bearish momentum. The put-call ratio (PCR) has marginally dipped to 0.63 from 0.68, reinforcing cautious market sentiment as call writers dominate. Max pain stands at 51,800, marking a key level for future movements, the note from SAMCO Securities said.
Bullish & Bearish stocks
Granules India has witnessed fresh addition of long positions. The stock gained 2.6 per cent in a falling market backed by a 52.6 per cent increase in OI. Similarly, Polycab India and Tata Chemicals also witnessed buyer interest on Thursday.
On the other hand, Balrampur Chini and Dabur India saw short build-up yesterday. The former slipped 1.1 per cent while the latter cracked 6.4 per cent amid 22.5 per cent and 13.4 per cent OI build-up. Among others, Bata India, Reliance Industries, Axis Bank, Manappuram Finance also witnessed build-up of short positions.
Stocks in F&O ban period on Friday, October 04
These are the 6 stocks placed under futures & options ban period on Friday – Bandhan Bank, Birlasoft, Granules India, Hindustan Copper, Manappuram Finance and RBL Bank.
