F&O Tracker: Bearish signals from Nifty 50 futures?

The Nifty 50 (16,049) and the Nifty Bank (34,683) were down last week, and they lost 1.1 and 1.3 per cent, respectively. The derivatives data shows bearish bias in Nifty 50 futures, whereas it is not that explicit in Nifty Bank futures.

The cumulative open interest (OI) of Nifty 50 futures on the NSE increased to 143.8 lakh contracts on Friday compared to 127.2 lakh contracts by the end of the preceding week. A drop in price along with an increase in the OI is indicative of fresh short build-up on the contract. On the other hand, the cumulative OI of Nifty Bank futures on the NSE has seen a drop to 25.2 lakh contracts last week from 26.8 lakh contracts a week ago. So, unlike Nifty 50 futures, Nifty Bank futures has seen a drop in OI along with a decline in price. This indicates that participants are liquidating the positions. Therefore, Nifty Bank futures’ OI do not indicate a clear trend.

Options data: The option chain of Nifty 50 shows that 16,600-strike call and 16,000-strike put have the highest OI in weekly expiry. Therefore, 16,600 and 16,000 are potential resistance and support levels. Similarly, in Nifty Bank, 35,000-strike call and 34,000-strike put have the highest OI. So, 35,000 and 34,000 are the potential resistance and support levels.

Note that the Foreign Institutional Investors seem to have developed a bearish bias as they have increased net short on index futures and have increased net long on index put options. Also, they have cut net long on call options, again, showing a bearish inclination.

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