FIIs up short bets in Nifty futures; analysts expect support at this level

Foreign institutional investors open interest in Nifty futures has increased by 4.8% since the start of February series, while the total OI in Nifty Feb futures dipped by 1.1%; shows NSE F&O data.

The NSE Nifty 50 index has broadly gyrated in the range of 23,300 - 23,800 in the eight trading sessions thus far in the February derivatives series. Despite, the net fall in the last four trading sessions, the NSE Nifty 50 index still quotes 0.6 per cent higher when compared with the index level at the start of the monthly series.  The derivatives Lot Size were revised from February series onwards, with the Nifty contract at 75 as against 25 earlier, and Bank Nifty at 30 versus 15 earlier.  As of February 10, the overall open interest (OI) in Nifty futures as dipped by 1.1 per cent shows, the NSE futures & options (F&O) data. Amid this dip, foreign institutional investors (FIIs) have increased their open positions in Nifty futures to the highest point thus far in February, up 4.8 per cent since the start of the series.  Data shows, that FIIs bias is on the selling side, thus open bets imply an increase in short positions in Nifty and other key index futures. FIIs overall OI across Nifty, Bank Nifty and MidCap Nifty futures has increased by 11 per cent so far in February. On Monday, FIIs net sold index futures worth Rs 1,814.65 crore  FIIs now hold near about six short positions in index futures for every long bet; with the long-short ratio falling to 0.17 in Monday's trade. In comparison, retail investors long-short ratio in index futures stands at 2.60; proprietary traders at 1.70 and domestic institutional investors (DIIs) at 1.21 - all implying presence of more bullish positions versus bearish calls.  The road ahead...  Technical analysts believe that the Nifty 20-day moving average around 23,300 holds the key in the near-term.  "Technically, the Nifty formed a red candle on the daily scale on Monday, indicating weakness. However, the index found support near the 21-day simple moving average (DSMA), which is placed around 23,290; on the upside, the 50-DSMA is placed around 23,740, which will act as a crucial hurdle, followed by 23,800", said Hrishikesh Yedve, AVP Technical and Derivatives Research at Asit C. Mehta Investment Interrmediates in a note.    Sustaining below, 23,290 could extend further weakness in the Nifty, cautions Hrishikesh.  In case of the Bank Nifty, as long as the index remains above the support level of 49,650, a buy-on-dips strategy should be implemented. On the upside, 50,600 will act as a stiff resistance in the short term, the analyst said.  Meanwhile, cues from the NSE options data suggest a bearish outlook for the Nifty and the Bank Nifty.  "The Nifty derivatives data reflects a bearish undertone, as call sellers maintain dominance over put writers, suggesting a shift toward seller control. New call writing across 23,400 – 23,800 strikes strengthen resistance, whereas put unwinding at lower strikes signals a bearish realignment", explained Dhupesh Dhameja, Derivatives Analyst at SAMCO Securities.  The 'Max Pain' level at 23,500 suggests limited downside on the Nifty despite heightened volatility, the analyst said in a note.  Whereas, in the case of Bank Nifty, the 51,000-call strike witnessed a significant spike in open interest (13.39 lakh contracts), reaffirming its status as a strong resistance zone. Conversely, notable put writing at the 49,000 strike (13.27 lakh contracts) underscores solid downside support. The 'Max Pain' level stands at 50,300.  F&O stocks in focus  On Monday, Delhivery, Phoenix Mills, Varun Beverages, Max Healthcare and Trent witnessed a selling bias, as these stock futures declined up 7 per cent alongside a notable rise in OI. On the other hand, Berger Paints saw some buying interest, while Chambal Fertilisers stock futures saw some profit-taking.  Manappuram Finance remains under F&O ban for the second straight trading session today.