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The Nifty 50 (17,807) and the Nifty Bank (41,668), after staying flat in the early part of last week, saw a sharp decline in the second half. While the Nifty 50 lost 2.5 per cent, the Nifty Bank was down 3.6 per cent over the past week. Here’s an analysis of derivatives data
Nifty 50: The Nifty 50 futures were down last week. Along with this, the cumulative Open Interest (OI) on the NSE increased to 143 lakh contracts on Friday compared with nearly 126 lakh contracts by the end of the preceding week. This is an indication of short build-up. Besides, the bearishness is substantiated by the Put Call Ratio (PCR) of options. The option chain of December expiry options show that the PCR stands at 0.59, indicating more call option selling than put writing. Therefore, the futures and options data give a bearish bias for the Nifty 50 index this week.
Nifty Bank: The Nifty Bank futures, unlike the Nifty futures, saw a decline in cumulative OI. It dropped to 28.9 lakh contracts on Friday as against 30.6 lakh contracts over the last week. A decline in price along with this shows that some of the existing longs are being unwound. That said, the PCR of December expiry of Nifty Bank options at 0.60 shows more call writing, giving it a bearish bias.
Overall, both the indices look set to decline further from the current level.
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