By Ruchit Jain
After the recent corrective phase from 18100 to 16750, the index has entered a consolidation phase and has traded within a range in last one week. The Nifty has been trying to defend its ‘200 DEMA’ support which will be a make-or-break level for the short term. The Global markets will be reacting to the US inflation data, but if we look at the US indices, they are trading near their supports and any positivity could lead to a pullback move there, which would have an impact on the global equity markets too.
In the derivatives segment, we have not seen any significant build-up in the last few sessions but the data indicates that its FIIs v/s Clients where the positions in the derivatives segment are on opposite side with the former holding significant short positions and the latter holding record long positions. If we look at the percentage of their total positions, the ‘Long Short Ratio’ of FIIs is now around 18 percent while that of the Client section is around 69 percent. This clearly indicates that the Client section is quite bullish on the market while FIIs are bearish. However, FIIs have been forming short positions in the entire correction since 18000 zone.
So in case we witness any pullback move in the global markets, then they may close out some of their positions and book profits which may lead to short covering. So traders should keep a close tab on the global market development which would drive the near term momentum. In the options segment, the coming weekly series has decent open interest outstanding in the 17000 put which hints at support near the current market price. On the flipside, the out-of-the-money call options have open interest scattered in various strikes and hence, how fresh positions build in the next couple of sessions will be important to see.
Looking at the current data, we have a positive view on the market for the coming week and in case we see any positivity in the global markets, then it could lead to a short covering move towards 17500- 17600 in the near term. Hence, traders are advised to avoid forming shorts till the index holds the support of 16750 and look for contra buying opportunities here in anticipation of a pullback move.
(Ruchit Jain is the Lead – Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)