F&O tracker: Markets could see sharp short covering
Strong, stronger and strongest. That aptly describes how Indian market has moved from strength to strength with indices building on gains.
Updated:
By Heman Nahata, IIFL
Strong, stronger and strongest. That aptly describes how Indian market has moved from strength to strength with indices building on gains despite the rest of world dwindling over the Greece debt fears.
The rally has been broad-based with heavyweights like LT, Reliance, Banks and Auto driving the market higher. We expect the market to continue its upward trend as we see a) No jump in volatility despite the global turmoil, b) sharp bounce from lows, c) resumption of FII buying in the cash segment and d) strengthening INR.
On option front, Nifty maximum callput OI is at 8500-8000 levels. Nifty has managed to close above 8500 level (highest level since April'15) this could stoke sharp short covering as call writers can get trapped if Nifty moves higher. Nifty PUT OI at major strike ranging from 7900-8400 suggests adequate hedge has been taken for protection in case of an adverse move.
OI data indicates FIIs longshort ratio on index futures has increased to (3x) from 0.78x low seen in May.Even, FIIs individual stock futures, cash-based buying and net index option positions indicate bullish stance on Indian market. To our surprise, Nifty futures closed at a premium despite upcoming dividends indicating short squeeze.
Over the past week, OI build-up is seen in Capital goods stocks like L&T, Siemens and Crompton Greaves, while BHEL is yet to see any major shorts, indicating that the sector could see the recent up-move continuing in the next few trading sessions.
Strong, stronger and strongest. That aptly describes how Indian market has moved from strength to strength with indices building on gains despite the rest of world dwindling over the Greece debt fears.
The rally has been broad-based with heavyweights like LT, Reliance, Banks and Auto driving the market higher. We expect the market to continue its upward trend as we see a) No jump in volatility despite the global turmoil, b) sharp bounce from lows, c) resumption of FII buying in the cash segment and d) strengthening INR.
On option front, Nifty maximum callput OI is at 8500-8000 levels. Nifty has managed to close above 8500 level (highest level since April'15) this could stoke sharp short covering as call writers can get trapped if Nifty moves higher. Nifty PUT OI at major strike ranging from 7900-8400 suggests adequate hedge has been taken for protection in case of an adverse move.
OI data indicates FIIs longshort ratio on index futures has increased to (3x) from 0.78x low seen in May.Even, FIIs individual stock futures, cash-based buying and net index option positions indicate bullish stance on Indian market. To our surprise, Nifty futures closed at a premium despite upcoming dividends indicating short squeeze.
Over the past week, OI build-up is seen in Capital goods stocks like L&T, Siemens and Crompton Greaves, while BHEL is yet to see any major shorts, indicating that the sector could see the recent up-move continuing in the next few trading sessions.
Too busy to trade in stocks? Invest in Mutual Funds with ET Money!
Bookmark or read stories offline -
Download ET Markets APP
Download ET Markets APP
ADVERTISEMENT
