F&O Tracker: Markets likely to shift to a lower range

By SIDDARTH BHAMRE, ANGEL BROKING

FIIs unwound their long positions last week. As we highlighted, their open interest has reduced much more than Nifty and BankNifty open interest since the beginning of the December series. This unwinding has continued and now we are witnessing formation of short positions by them with sell figures emerging in cash market segment as well. This certainly won't go down well with participants who are bullish on the markets.

After making all-time high on December 4, the market has corrected by around 300 points without giving any bounce. Also we haven’t seen any meaningful unwinding in Nifty, which indicates that longs are still holding on to their positions. Despite the correction, we haven’t seen any major change in PCR-OI, which has been hovering around 0.91-0.95 levels. This is mainly due to the overall shifting of options positions among participants.

There is unwinding in 8600 and above calls and build-up in 8300-8500 calls, while unwinding is also witnessed in 8400 strike and above and build-up in 7900-8200 puts. This suggests that options traders are now playing for lower range, which indicates market may shift to a lower range.

Around 8180-8200 lies good support for this market; in September, the same zone acted as strong resistance.

Implied volatility has inched up a bit to 12.08 per cent, which is still at moderate levels. We recommend that shorts created around 8550-8600 spot levels should be held onto. However, looking at the time left for the expiry and that there’s is a good support around 8200 levels, it’s advisable to short some 8200 puts if and only if one has short positions in Nifty futures.