Interestingly, the May-end Nifty options chain still indicates bullish sentiment with PCR at 1.13.
Even as a bounce in stocks can’t be ruled out given the heavy selling in the past seven sessions and a partial reprieve in global trade tensions, foreign investors have turned cautious on Indian equities recently.
While they continued to be net buyers in the month through May 9, their cumulative longshort ratio (by open interest) on derivatives contracts slipped 20 basis points to 1.52 on May 10 from 1.72 on May 2. Further, they sharply reduced their cumulative net long open positions on index futures — Nifty and Bank Nifty — to 40,665 contracts from 1,06,661 contracts over the same period, during which the Nifty corrected 3.8 per cent.
Rohit Srivastava, head technical at Sharekhan by BNP Paribas expects a short-covering rally as the market was substantially “oversold.” The front week Nifty options chain expiring on May 16 indeed shows heavy short build-up. The front week open interest put-call ratio (PCR) was at 0.59 at Friday close, indicating traders have sold substantially more calls than puts, which they would have to cover in the event of a global market bounceback or hope rally prior to the poll outcome on May 23.
Interestingly, the May-end Nifty options chain still indicates bullish sentiment with PCR at 1.13.
