By Ruchit Jain
Post last week’s expiry, our markets gradually moved higher and reclaimed the 18000 level in Tuesday’s session. However, on Tuesday evening the US markets reacted much negatively to their inflation data and hence our markets too started with a gap down opening on the next day. But our markets have shown great resilience recently as the gap down opening witnessed buying interest in spite of so much negativity in the global markets. Without much damage, Nifty has ended the weekly expiry tad below 17900 mark and has kept the supports intact so far.
The Bank Nifty index has relatively outperformed so far due to formation of long positions in the index. The index even recorded a new all-time high above 41800. Now if we dig into some data, the Bank Nifty index has seen long formations which led to its outperformance. But the open interest data indicates that the FII’s have not participated on the long side in the index futures segment in this month. The Client segment has formed long positions but FIIs have been on the short side. They started this monthly series with short rollovers and have added more shorts due to which their ‘Long Short Ratio’ is now around 24 per cent. It means that 76 per cent of their positions in the index futures segment are on the short side.
On the other hand, the client segment has been riding this trend and their long positions in the index futures are at 60 percent. If we look at the options segment, the open interest concentration is seen at 18000-18100 strikes which would be seen as the immediate hurdle. On the other hand, data is scattered in put options but technical structure indicates that 17700 would be a sacrosanct support and hence will be a make or break level. The trend remains positive till Nifty trades above 17700 and hence one should keep a close tab on this level. If the index breaches this support, then one should exit longs and the market could then see a price-wise corrective phase.
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Build of fresh positions from here will be the key data to watch. Also apart from this data, traders should also keep a close watch on the USDINR currency pair. The rising Dollar Index is usually negative for equities and both are inversely correlated. However, a relative outperformance by INR compared to other global currencies has also led to the outperformance in our equity market. Hence, short term traders should also keep a close watch on the currency pair as any directional move in the same could give an early indication of the near term direction for the equities.
(Ruchit Jain is the Lead – Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)