Index futures net holdings by foreign investors have plummeted to their lowest level in over two months. The November F&O series is further expected to begin with about INR 2.76 lakh contracts for FIIs, compared to a peak of INR 7.17 lakh contracts on September 23.
"The domestic market appeal, which was already impacted by weak corporate earnings and premium valuations, has been impacted by aggressive selling by FIIs due to a tactical shift to China," said Vinod Nair, Head of Research at Geojit Financial Services.
Furthermore, In a letter, the analyst signified that it will take an increase in domestic company profitability and the achievement of fair valuations for FIIs to reverse their position. In recent times, EMs have also been consolidating in anticipation of the FOMC interest rate decision and the US presidential election.
Also, due to the US Federal Reserve Policy on November 7 and the US Presidential elections on November 5, equity markets are expected to see significant volatility this week. Aside from that, individual counter sentiment may be influenced by Q2 earnings.
To speak it in a technical term, Jatin Gedia, who is a research analyst at Sharekhan, believes that the Nifty has critical support between 24,200 and 24,180 levels and resistance between 24,500 and 24,550. A bearish inclination is shown by the Nifty options data, which shows a cautious tone with aggressive call writing outweighing put activity. The 24,250 strike Call and the 24,200 put have the most open interest.
Increased confidence among sellers is shown by elevated call writing in the 24,250–24,500 region, while unwinding suggests a discernible change towards negative sentiment. A pessimistic perspective is reinforced by the put-call ratio's (PCR) easing from 0.86 to 0.79, according to Dhupesh Dhameja, Technical Analyst at SAMCO Securities.
Active trade in the 51,600–51,900 Call and 51,000–51,500 Put ranges for the Bank Nifty indicates strong call writer resistance between 51,600 and 52,000 and stable support between 51,000 and 51,500. The Put-Call Ratio (PCR) maintained its gloomy perspective as it dropped from 0.91 to 0.68. Moreover, according to Dhupesh Dhameja, the "max pain" level of 51,700 is probably going to be critical in determining the short-term trajectory.
Who is more bullish or bearish among FII, retail, and proprietary traders?
The last two trading sessions, including the special Muhurat trading session, saw net sales of index futures by foreign institutional investors (FIIs). On Thursday, the October series' expiration session, FIIs net sold index futures worth INR 1,989.46 crore, whereas on Friday, they net bought index futures worth INR 95.53 crore.
According to NSE data, on Thursday, FIIs net sold 13,240 contracts of Bank Nifty futures for Rs 1,031.31 crore and 15,981 contracts of Nifty futures for INR 973.07 crore.
Also, as per the data, at the beginning of the series, FIIs' open interest (OI) in index futures was relatively low at 2.76 lakh contracts. While creating some new bearish wagers in Bank Nifty, FIIs appear to have covered shorts in Nifty futures.In recent trading sessions, FIIs appear to have covered shorts in Nifty futures while generating some new bearish wagers in Bank Nifty.
The FIIs long-short ratio in index futures has fallen to a low of 0.29 as a result. According to this ratio, for each bullish trade, FIIs have more than three short positions in index futures. In the meantime, the long-short ratio of proprietary traders increased 5 basis points to 0.75, while that of retail investors in index futures increased to 1.89.
