The Nifty 50 (17,787) and the Nifty Bank (40,991) ended the week with a gain of 1.2 and 0.5 per cent, respectively. The difference in gain was due to the divergence in performance on Friday when the Nifty 50 went up whereas the Nifty Bank depreciated.

That said, the trend in the cumulative Open Interest (OI) of futures of both indices on the NSE shows that there was considerable long liquidation, especially on Friday. While this is not a confirmation of a bearish reversal, this is a caution for those who are long on Nifty 50 and Nifty Bank futures.

Nifty 50: The cumulative OI Nifty 50 futures on the NSE tumbled to 123 lakh contracts on Friday (lowest in the last two months) compared to 159 lakh contracts on previous Friday. Notably, it stood at 174 lakh contracts on Thursday, the highest in the last four months. The huge swing in OI means the longs were liquidated with a sense of urgency. The PCR (Put Call Ratio) of the nearest weekly options show that more calls are written and that means, the participants might be expecting the underlying index to stay with a downward bias.

Nifty Bank: Nifty Bank futures too saw longs going out as the cumulative OI fell to 20.4 lakh contracts on Friday versus 23.5 lakh contracts a week ago. Although the fall in OI was not as sharp as it was in Nifty 50. That said, the PCR of nearest weekly options is at 0.65. Therefore, participants seem to have positioned themselves for a decline from here.