F&O data suggests Nifty in oversold zone, key support seen at 23,500

F&O cues for Nov 05: However, as long as the Nifty holds above 23,890, a potential pullback could drive it towards 24,200 - 24,300 levels, says analyst at Asit C. Mehta.

Futures & Options (F&O) Insights for Tuesday, November 05: The NSE Nifty 50 index ended below the 24,000-mark on Monday amid the sharp fall ahead of the US elections. The NSE INDIA VIX jumped over 5 per cent to 16.70, implying higher volatility going ahead.

 

Technically, the Nifty formed a red candle on the daily chart, indicating weakness. However, the index was able to defend its previous support of 23,890 and stabilized near 24,000 levels, said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates.

 

As long as the Nifty holds above 23,890, a potential pullback could drive it towards 24,200 – 24,300 levels. A close below 23,890 may prompt additional selling pressure, potentially testing the 200-Days Exponential Moving Average (DEMA) near 23,500, the analyst added.

 

 

Key Insights from Nifty options data

 

Among the Nifty options, there is a significant concentration of open interest at the 24,300 Call and 24,000/ 23,500 Put levels. The Nifty Put-Call Ratio (PCR-OI) stands at 0.623, indicating a cautious market sentiment, explains Sahaj Agarwal, Senior Vice President, Head of Derivatives Research at Kotak Securities.

 

The broader markets have experienced significant selling pressure over the last month. However, we anticipate some support around the 23,500 mark, which represents a value zone for the markets, the analyst added.

 

The derivative and technical parameters are in extremely oversold territory, and some respite from sell-off could uplift the overall sentiments, said Osho Krishan, Senior Analyst - Technical & Derivatives at Angel One.

 

On the level-specific front, a series of stiff resistance could be seen around the 24,200 - 24,400 subzones and a sustained breakthrough could only direct for potential reversal from the on-going carnage. At the lower end of the spectrum, 23,900 - 23,800 withholds a pivotal support area, and a breakdown could drag the index lower towards 23,500 - 23,450, coinciding with the 200-SMA, the analyst said.

 

FII v/s Retail v/s Proprietary traders: Who is bullish/ bearish?

 

Foreign institutional investors (FIIs) were net sellers of index futures worth Rs 580.38 crore on Monday. They net sold 9,686 contracts of Nifty futures to the tune of Rs 580.665 crore, and 1,552 contracts of Bank Nifty futures for Rs 120.20 crore. FIIs, however, net purchased 2,455 contracts of MidCap Nifty futures for Rs 151.26 crore.

 

FIIs open interest (OI) in Nifty futures rose by nearly 25 per cent on Monday, mainly on account of fresh short additions. Total OI in index futures also increased by 10.2 per cent to 3.04 lakh contracts as against 2.76 lakh contracts the day before.

 

Pursuant to which, FIIs long-short ratio in index futures rose marginally to 0.31. This ratio still implies that FIIs hold more than 3 short positions in index futures for every bullish trade.

 

Meanwhile, retail investors' long-short ratio in index futures jumped to 1.97 - meaning 2 bullish bets for every bearish position. Proprietary traders ratio dipped to 0.61.