F&O Outlook: FIIs covering shorts, but stay vigilant entering expiry week; Nifty support in 16300-16250 range

FIIs ‘Long Short Ratio’ which was below 17 per cent post last week’s expiry now stands around 40 per cent which clearly indicates short covering by them.

F&O Outlook: FIIs covering shorts, but stay vigilant entering expiry week; Nifty support in 16300-16250 range
In the Futures segment, foreign investors had a significant amount of short positions and they have started covering the short positions (Image: Pixabay)

By Ruchit Jain

The NSE Nifty 50 index completed its intermediate correction during last week’s expiry and it then resumed its short-term uptrend. The index crept higher throughout this week and ended the expiry day above 16600. During the week, we witnessed a combination of short covering and fresh long formations which led to positive momentum. The Nifty Bank index too witnessed similar momentum and ended above 36200. 

In the recent past, selling by Foreign Institutional Investors (FII) was a major concern and domestic stock markets have seen sharp corrections due to the same. However, Foreign Institutional Investors have turned buyers in the cash segment in the last couple of sessions to the tune of over Rs 1700 crore in each session. It would be crucial to see if they continue this buying on a sustainable basis which would drive market momentum. 

In the Futures segment, foreign investors had a significant amount of short positions and they have started covering the short positions as the global markets have seen a rebound. Their ‘Long Short Ratio’ which was below 17 per cent post last week’s expiry now stands around 40 per cent which clearly indicates short covering by them. 

On the other hand, the Client segment continues with its positive bias and has just over 57 per cent of positions in the index futures segment on the long side. In the options segment, the monthly expiry has the highest open interest outstanding in 17000 call options and 16500 put options followed by 16000 put. Interestingly, open interest build up in 16500 put hints that it will be the crucial level and if the index closes below that, then there could be some long unwinding. The next support, in that case, will be seen in the range of 16300-16250.

The data continues to be positive, but traders should be vigilant on market moves and as the index has already seen an up move from 15200 to 16600, one should not rule out some higher volatility in the expiry week. 

(Ruchit Jain is the Lead Research at 5paisa.com. FinancialExpress.com does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Photos