F&O Tracker: Are bears coming back?

Akhil Nallamuthu |BL Research Bureau | Updated on: Jun 04, 2022

The Nifty Bank seem to be more bearish as it appears to lead the benchmark Nifty 50

The Nifty 50 and the Nifty Bank saw a diverging performance last week as the former gained 1.4 per cent whereas the latter ended the week with a loss of 0.95 per cent. Nevertheless, there seem to be a similarity in the overall bias of both the indices which now look bearish.

The cumulative open interest (OI) of Nifty 50 Futures on the NSE dropped last week to 118 lakh contracts on Friday compared to 128 lakh contracts a week back. The futures contract rallied in this period, indicating a long liquidation. This is following a strong long build-up that occurred between May 19 and May 26. The Put-Call ratio (PCR) is now at 0.74 showing more call option writing over put writing. Thus, the recent bullishness that we saw looks to be fading fast and this increases the possibility of a decline from here.

The Nifty Bank seem to be more bearish as it appears to lead the benchmark Nifty 50 currently. That is, long liquidation happened between May 23 and May 30 and over the past week there were some short build-ups seen. The cumulative OI of the Nifty Bank futures on the NSE went up to 27 lakh contracts on Friday versus 24.8 lakh contracts by the end of the preceding week. The futures dropped by nearly 1 per cent. The fall in price and an increase in the OI is an indication of short build-up.

So, both the indices look set to fall where the Nifty Bank could decline more than the Nifty 50.

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Published on June 04, 2022
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