F&O tracker: Traders see Nifty in 8,600-9,000 range

Anand James, Geojit BNP Paribas

NSE Nifty futures' open interest has been on a decline since March 3, but Bank Nifty futures' aggregate OI remained positive during the same period.Meanwhile, SGX Nifty futures' aggregate open interest remains near the year's peak touched February 26.

Total F&O turnover in Indian exchanges continues to rise after March derivative series became active. Bulk of the action is witnessed in index call options, which are probably seeing unwinding after Nifty hit a peak on March 4. This reasoning is also supported by the rise in the PC ratio of index open interest. It has been on a rise lately, but is still below a year's average.
PC ratio of stocks' OI is also below average, and there is hardly any stock active in the F&O segment with PC ratio above 1. It is possible that the recent price falls in stocks may have attracted more interest in calls, but such a bias increases the risk of magnifying falls if stocks were to slide further.

Meanwhile, FII net equity investment remained positive since February 16. However, the combined trade volume of cash segment in NSE & BSE has remained below a year's average for over two weeks now, suggesting that traders in the equity segment are looking for fresh cues after Budget announcement.

India VIX, an indicator of volatility based on the Nifty index option prices is at 17.38, and has been easing since February derivatives' expiry. Open interest distribution across the put-call spectrum of Nifty hints at 8600-9000 as the region that traders have estimated the price moves to be in, in the event of a rise in volatility.