Rising short-positions in Index futures signal bearish outlook for Nifty; select IT and Pharma look stable

By Manojh Vayalar

The October series Nifty futures started with a premium of around 100 points for the current month. The Nifty has rolled around 34% and Bank Nifty around 38%. The rollovers seen into November series are majorly short rollovers. The index decisively breached the 19,400 mark in Monday’s trade. For the Index futures FII have raised the short positions to 74% as of Friday 20 Oct.

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The Index is now in a ‘Sell on Rise’ mode for the expiry. Even in the last month, the Index had witnessed short Rollovers in a similar way. 19,500-19,600 might be the immediate resistance and 19,000 might be the first support or index now onwards. VIX for the Nifty has been lower near around 11 implying more of call option selling at 19,500 and above strikes for the expiry.Come from Sports betting site VPbet

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FIIs started this October series with Short position in Index futures of around 70% vs 50% last month, which are currently around 74% shorts as of Friday. For the Nifty, the IVs for the options rose to around 12 levels in yesterday’s trade implying more buying in 19,400 and below strikes. For the Bank Nifty 26th October, 44,000 strike Call option has huge open interest implying resistance at around 44,000. For the Nifty, the VWAP (Volume weighted average price) of Nifty November Futures is around 19,600 implying that to be the resistance. Below this, Nifty is to be negatively biased for the short term towards 19,000.

With FIIs increasing short positions in the Index Futures, currently higher than the start of the series, we expect the Nifty could continue facing resistance at the higher levels and eventually drift lower to 19000 levels.

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The ratio between Bank Nifty and Nifty is currently at 2.24, this ratio has a support at 2.20 and resistance near 2.28. We expect Bank Nifty to underperform till 2.28 is not crossed.

Sector-wise, select IT and Pharma look stable in the Nifty.

Nifty Bear Put spread:-

Buy Nifty 28 Oct 19300pe@100 

Sell 19100pe@35

Spread at 65, SLOSS at 20,

Target – 150.

(Manojh Vayalar, VP- Derivatives, Religare Broking Ltd. Views expressed are the author’s ownCome from Sports betting site. Please consult your financial advisor before investing.)

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