The unwinding of over leveraged positions in the derivative segment, considered the factor that triggered the downslide on Monday, continued for the second consecutive day following the margin calls given by the brokerages due to the drastic fall in the stock prices. As a result the domestic equity indices tumbled to post their biggest ever intra-day fall ever. Nifty January futures closed the day at 4,894.60 points with a marginal discount of 4.7 points when compared to the spot Nifty close of 4899.30 points.
The outstanding open interest (OI) position in Nifty January futures stood at 3.09 crore shares witnessing a sharp fall in OI by 19.38% or 74.45 lakh shares pointing towards further unwinding of positions.
Market experts feel that the market is still over leveraged and further unwinding should happen to take it to its normal level.
Monday?s fall has resulted in the market wide outstanding position in the derivative segment to slide down to Rs 1.11 lakh crore from Rs 1.32 lakh crore. And market experts says that another Rs 20,000 crore to Rs 30,000 crore worth of positions would have been liquidated in Tuesday’s unwinding.
Tejvinder Singh, derivative analyst, Arihant Capital Markets, says, ?Market would feel comfortable only when the outstanding market wide OI position in the derivative segment comes down in the range of Rs 60,000 crore to Rs 70,000 crore which is quite normal and ideal.?
Meanwhile the Implied Volatility (IV) in Nifty options is still hovering in the range of 50-60% indicating the high level of nervousness prevailing among the investors.
?At present rather than technical or fundamental factors, it is purely the sentimental factors that are driving the market. So how the Indian markets would move in the coming days will depend lot on how the US equity market behaves?, says Singh. And give the Fed rate cut announcement, there could be a strong change in sentiment. However, momentum on early sessions is expected to set the trend for rest of the day and even ahead.
