F&O tracker: FII unwinding makes markets vulnerable

By Siddharth Bhamre, Angel Broking  In the last two expiries, Nifty futures have seen reduction in open interest. This can be attributed to the unwinding of long positions by FIIs. Continuous unwinding of longs by them reduces their participation and makes our market vulnerable to global moves.

At the same time, these guys were sellers in a cash market and their Thursday's F&O data indicates long unwinding plus some formation of shorts in index futures and fresh formation of shorts in stock futures.
Options data of Nifty is all over the place now; however, on Wednesday, there was substantial build-up in 8500 and 8600 calls. This range, the previous support level, may now act as near-term resistance for the markets.

Looking at the price action, it appears the next support for Nifty is around 8150-8200 levels. At the lower side of this 8150-8600 range, one may think of forming a bullish spread strategy. Till then, one may hold on to short positions with stop-loss of 8465 on a closing basis in spot.

The Bank Nifty has marginally underperformed the Nifty in the last series but it has seen formation of short positions, which got rolled over, too. Also, this index has breached its important support, which was around 18200. This has negative implications. Components of the Bank Nifty also are showing weakness.

HDFC Bank has seen a formation of fresh short positions, while ICICI Bank continues to remain under pressure and has seen most of the shorts getting rolled over.

Metal was one of the worst performing sectors, with stocks like Tata Steel correcting due to formation of long positions, while Hindalco shed its open interest in correction. The major outperformer in the series gone by was the telecom sector, with stocks like Idea going up with huge formation of long positions.