F&O Insights: Nifty, Bank Nifty PCR turns bearish; Longs added in MidCap; Shorts from RIL

The Nifty wiped out all of last week’s gains in the opening session of the week. This was expected as several indicators crossed overbought territory and prices hit a key resistance area around 26,200 – 26,300 last week, marked by Fibonacci extensions on the higher-grade chart, said Rajesh Bhosale, Equity Technical Analyst at Angel One.

Going forward, we expect profit booking to continue and prices could test the 20-EMA around 25,500. On the downside, resistance is likely to be found at 26,000, followed by a bearish gap at another 26,100 on Monday, the analyst added.

Meanwhile, Bank Nifty futures cracked 1.5 percent and the premium rose to 457 points against 386 points the day earlier.

Technically, the Bank Nifty formed a major bearish candle on the daily chart, followed by the Morubozu candle, indicating further weakness, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Intermediates.

On the downside, immediate support is expected near 52,720, where the 21-DEMA is placed, followed by 51,890 at the 50-DEMA. In the short term, any rise towards 53,300 – 53,350 should be used as an opportunity to book profits, the analyst said in a note.

Key insights from Nifty, Bank Nifty options data

The Nifty options market reflects a shift in sentiment, with call writing overtaking put writing, breaking a seven-day bullish streak. Significant open interest at the call of 26,000 (89.63 lakh contracts) and the put of 25,000 (53.78 lakh contracts) indicate resistance at 26,000, Dhupesh Dhameja, derivatives analyst at SAMCO Securities said in a note.

The increased put activity in the 25,500-25,800 range indicates call writers are moving lower, while unwinding puts highlights bearish dominance. The put-call ratio (PCR) fell from 1.04 to 0.69, reinforcing the cautious stance. The maximum pain is 25,950, which marks a key level for future moves, the analyst said.

Echoing similar views, Sahaj Agarwal, Senior Vice President and Head of Derivatives Research at Kotak Securities said there is significant open interest build-up at the 26,000 Call and 25,000/26,000 Put levels. For the monthly series, a build-up is observed at the 26,600/27,000 Call and 25000/26,000 Put strikes.

The Nifty Put-Call Ratio reflects the negative sentiment among market participants. We expect limited upside and potential consolidation in the near term, Sahaj Agarwal said in a note.

In the case of Bank Nifty, significant open interest was observed at the 54,000 calls (37.25 lakh contracts) and 52,000 puts (22.89 lakh contracts), with heavy trading concentrated between 53,100 – 53,200 calls and 52,800 – 52,900 puts, said Dhupesh Dhameja.

The increased put activity in the 52,500-52,800 range suggests that call writers are adjusting to lower levels, while the expiring signals are growing bearish dominance. The put-call ratio (PCR) fell from 0.69 to 0.58, reinforcing caution as call writers dominate, the note concluded.

FII, DII trading activity in F&O – Here’s everything you need to know about who bought and who sold in the derivatives market on Monday.

According to available data from the NSE, FIIs sold a net 23,144 index futures contracts amounting to Rs 1,702.25 crore on September 30. FIIs sold net 14,385 contracts of Nifty futures amounting to Rs 941.74 crore, and 12,886 contracts of Bank Nifty futures worth Rs 1,034.87 crore. FIIs bought a net 4,356 contracts of MidCap Nifty futures yesterday.

Despite the net turnover, FIIs’ overall long-short ratio in index futures remained extremely bullish at 4.2:1. This ratio means that foreign investors hold more than four long positions in index futures for every bet on the short side.

The NSE data shows that FIIs have reduced some long positions in Nifty and Bank Nifty, while adding new long positions in MidCap Nifty futures. The open interest (OI) in Nifty and Bank Nifty declined by 5.1 percent and 12.9 percent respectively; while MidCap Nifty rose 6 percent.

Meanwhile, retail investors cut some of their short bets in index futures amid yesterday’s market decline. The long-short ratio increased to 0.58:1; this means that retail investors hold 3 long positions in index futures for every 5 bets on the short side of the trade. Retail short positions are at their lowest levels in the past seven trading days.

While the long-short ratio of domestic institutional investors (DIIs) in index futures remained stable at 0.64; this means 2 long positions for every 3 short bets.

Interestingly, proprietary traders added aggressive short bets in index futures on Monday. The long-short ratio in this trading segment fell sharply to 0.26:1; this means that proprietary traders hold almost five short positions in index futures for every long bet.

Bullish and bearish stocks

Balrampur Chini and Hindustan Copper witnessed a prolonged pullback on Monday as the stocks ended marginally in the red, alongside a decline in open interest. Both stocks were previously in an uptrend.

On the other hand, Reliance Industries saw another short position as its shares fell 3.4 percent on the back of a 10.4 percent increase in open interest. Similarly, SBI and Indian Hotels also saw some short positions emerging.

Stocks in F&O ban period on Tuesday

On Tuesday, four stocks were placed under the ban period for futures and options. Balrampur Chini, Bandhan Bank, Hindustan Copper and RBL Bank are the four stocks.