F&O Tracker: Don't go long just yet, bounceback not a trend

By Siddarth Bhamre

We were vocal about FIIs’ selling on their return from vacation and we have seen significant amount of cash base selling and huge amount of long unwinding in index futures by them. The quantum suggests that the unwinding is not done to form longs again after few days, so we are not reading too much into current bounce back in this market.

Also there was unwinding which suggests that some shorts may have booked profits.
On Tuesday, market fell significantly and next day we saw some buying taking place in 8100, 8200 and 8300 calls and at the same time FIIs were net buyers in index options. Also, Brent crude bouncing back from $50bbl. was supporting market bounce back. Near this level, a natural psychological support exists. Current bounce back in market is not a changing trend and one should not be in a hurry to form long positions.

Decline of implied volatility by almost 150 bps of a day’s bounce back and mainly calls IV’s reducing are also not encouraging. Also, we have seen some unwinding in calls in Thursday’s session. Taking this into consideration, we suggest that for taking fresh short positions, one should now wait for either FIIs shorting in index futures or Brent crude below $50bbl.

Infosys is seeing not much action in its futures segment and its implied volatility of 37.80% is nowhere near its results syndrome average. Some of it can be attributed to market attention on global scenario and some due to change in results timings which has reduced result’s day volatility to a large extent irrespective of the kind of results.

Siddarth Bhamre is associated with Angel Broking