The trading in derivatives segment on Thursday was marked by build-up of short position in Nifty futures and unwinding of long position in individual stock futures. Analysts say that heavy selling was witnessed not only in derivatives market but also in the cash market, owing to high turnover in the cash segment.
Nifty August futures closed at 4,144.95, with the discount increasing to 33.65 points over the spot Nifty?s close of 4,178.60 points, pointing to a strong bearish undertone in the market.
Siddarth Bhamre, derivatives analyst at Angel Broking, said, ?At every rise short position is being build up in the market indicating a bearish sentiment. In the money call, writing has happened at 4,100 levels that shows that the market may further correct. We are not bullish about the market as it is at the mercy of US markets and if this negative sentiment continues globally, Nifty could easily breach the 4,100 level.?
The implied volatility (IV), which indicates investors perception of future volatility in the market, in Nifty options has shot up sharply to around 34-35% level, indicating a high level of nervousness among the investor community. Bhamre adds, ?The high IV at 34%-35% is a serious concern for the market which shows that the market would be highly volatile in the coming days, whose movement will be more biased towards downside.?
Unwinding pressure was seen in individual stock futures having high open interest (OI) with long position. Stocks like GMR Infra, Reliance Energy, India Infoline, Central Banks which had high open interest with long position were hardly hit on Thursday. At the same time build up of short position was seen in index heavyweights like Reliance, ONGC, ICICI Bank etc.
Sunil Jain, derivative analyst, Edelweiss Securities, said, ?Still there are some long position open in many individual stock futures. As the sentiment is bearish we could see more unwinding happening and the market correcting further.?