MUMBAI: Derivative traders have become pessimistic about the prospects of the near-term market after the Nifty fell below the psychological 6000-mark on Tuesday.
“Option writers (sellers) have unwound their positions in 6000 put, which had the highest amount of open interest, implying weakness for the Nifty,” said Manoj Murlidharan, AVP-Derivatives, IIFL-PReMIA. “Investors should use any relief rally to exit their long positions,” he said.
The Nifty fell 133 points, or 2.2%, to 5988.70 on Tuesday, tracking weakness in global markets. Nifty November futures closed at a six-point premium to the spot as against 16 points on Monday, suggesting unwinding of long positions.
“This drop in premium was due to the spurt in short positions created in the system in the past two trading sessions. Earlier, institutions hedged their positions by buying Nifty futures due to which the premium was maintained, but, with the change in sentiment, investors have been selling heavily,” Mr Murlidharan said.
Foreign institutions have sold Nifty futures worth Rs 4,000 crore in the past five trading sessions and have written (sold) call options of 6100 and 6200 strikes, suggesting that the Nifty could find it tough to cross these levels.
While call options of 6200 and 6300 strikes saw over 81 lakh and 98 lakh units added in open interest, 6100 put saw heavy unwinding of positions as it shed more than 12 lakh units in open interest.
Traders expect the Nifty to correct till 5850-5875 levels as most of the stocks have witnessed delivery-based selling. Though the Nifty has found good support around 5980 in the past, traders remain wary this time.
The India Volatility Index (VIX), a measure of traders’ expectation of volatility, rose by 4.35% to close at 21.13%. Traders say that with only a few trading sessions remaining before the expiry of the current series, the volatility is expected to increase.
“If the global markets do not find support, the volatility will increase further below 6000 levels,” said Amit Gupta, Head-Derivatives, ICICI Securities .
He advised against creating fresh short positions at current levels. Traders should wait for a spike till the 6030-6050 levels, before short-selling again, he said.
“Option writers (sellers) have unwound their positions in 6000 put, which had the highest amount of open interest, implying weakness for the Nifty,” said Manoj Murlidharan, AVP-Derivatives, IIFL-PReMIA. “Investors should use any relief rally to exit their long positions,” he said.
The Nifty fell 133 points, or 2.2%, to 5988.70 on Tuesday, tracking weakness in global markets. Nifty November futures closed at a six-point premium to the spot as against 16 points on Monday, suggesting unwinding of long positions.
“This drop in premium was due to the spurt in short positions created in the system in the past two trading sessions. Earlier, institutions hedged their positions by buying Nifty futures due to which the premium was maintained, but, with the change in sentiment, investors have been selling heavily,” Mr Murlidharan said.
Foreign institutions have sold Nifty futures worth Rs 4,000 crore in the past five trading sessions and have written (sold) call options of 6100 and 6200 strikes, suggesting that the Nifty could find it tough to cross these levels.
While call options of 6200 and 6300 strikes saw over 81 lakh and 98 lakh units added in open interest, 6100 put saw heavy unwinding of positions as it shed more than 12 lakh units in open interest.
Traders expect the Nifty to correct till 5850-5875 levels as most of the stocks have witnessed delivery-based selling. Though the Nifty has found good support around 5980 in the past, traders remain wary this time.
The India Volatility Index (VIX), a measure of traders’ expectation of volatility, rose by 4.35% to close at 21.13%. Traders say that with only a few trading sessions remaining before the expiry of the current series, the volatility is expected to increase.
“If the global markets do not find support, the volatility will increase further below 6000 levels,” said Amit Gupta, Head-Derivatives, ICICI Securities .
He advised against creating fresh short positions at current levels. Traders should wait for a spike till the 6030-6050 levels, before short-selling again, he said.
Src: ECONOMICTIMES