F&O Data Points To Further Selling Pressure In Nifty, Say Analysts

Foreign institutional investors have sold index futures worth Rs 3,616 crore, while they sold index options worth Rs 23,036 crore and stock futures worth Rs 567 crore.

Markets have broken the trading range of 17,800 and 18,200 very swiftly, according to analysts.

Here are the highlights of what the analysts have to say:

Futures and options data points towards a high amount of concentration at 18,000 strike Call Option, which has moved to 17,800 levels, said Bissa.

As long as the NSE Nifty 50 Index does not close above levels of 17,800, he expects it to be a sell-on-rise market for now.

The Nifty is trading near the key support area of 17,500 in the spot market. So, if it closes below 17,500, Nifty can slip towards 17,300 or 17,200 in a short span of time, he said.

"For the Nifty to inch higher, there will be a select few sectors and stocks which will need to outperform," Bissa said. "We have seen a significant underperformance in the Bank Nifty, due to which we may see a technical bounceback of 100 points, but not a sharp up-move."

If the Nifty does not close above 17,800, call writers of strikes between 17,800 and 18,000 will not panic nor see a reason to cover their positions, according to Bissa.

"Till then, there will be comfortable selling out of the money call option and we may still stick in the range of 17,500 and 17,700 levels on the Nifty. Until we do not see the Bank Nifty closing above 41,000, we do not expect to see sharp short covering in Bank Nifty."

Bissa expects SBI to slip to Rs 510, and advises investors not to short the stock as the charts looks weak.

He expects HDFC Bank Ltd. to remain rangebound "as we are seeing high amount of writing at 1,500 put option and 1,700 call option".

Bissa said the structure for ICICI Bank Ltd. remains weak and advises investors to stay away.

According to him, if Adani Enterprises Ltd. and Adani Ports and SEZ Ltd. witness incremental shorts, then there will be more pressure.

But, if the open interest addition is on the lower side and does not breach the previous lows, then there is nothing to worry about, Bissa said. "But if we see high open interest addition on the stocks and if it goes below Friday's low, then it will be a matter of worry."

"Maruti Suzuki Ltd. has witnessed a round of short covering. Hence, the stock should be on the radar and also Bharti Airtel Ltd. is witnessing some short covering," he said.

Markets are at a crucial inflection point and Sharma is hoping for a breakout or a breakdown from the painful consolidation seen earlier. Momentum traders have felt that consolidation has taken them out on both sides, he said.

"Now that we have a breakdown, it is good news in terms of momentum. Below 17,750 mark, this is a breakdown and Nifty is headed towards 17,200 levels on the downside," Sharma said.

According to him, the Nifty has violated the 200-day exponential moving average for the second time for the day. "FIIs have sold heavily in index futures. Bank Nifty has borne the brunt of selling pressure as the put call ratio was 0.4 times on Friday, indicating that the Bank Nifty is in a pretty oversold territory."

Technical bounce in Bank Nifty is a high possibility due to the brutal hammering it has witnessed and it is important for Bank Nifty to close above 41,000 levels, he said.

Short covering in Bank Nifty should continue in order to see a bounceback, according to him. Overall sentiment needs to improve, he said.

According to him, the Feb. 2 expiry will be crucial to watch out for as significant build-up is happening at 40,000 strike price.

On the put writing side, 39,500 and 39,000 puts are witnessing a high amount of writing, he said. Technical set-up suggests a short bounceback and then a reattempt to test the floor of 39,000 levels on the downside before we see capitulation in the banking index.

Sharma expects high amount of volatility on both sides due to key events like the Union Budget, closing of Adani Enterprises Ltd's follow-on public offer on Tuesday and the U.S. Fed meet.

He advises traders to stay light in this phase and advises investors to start "nibbling" from a three–six months perspective.

Markets are in a situation where sentiment will overplay any sorts of levels, he said.

Retail investors are stuck with the highest positions since Oct. 25 in Index futures, which stands at approximately 96,513 contracts as on Friday, Sharma said. According to him, retail investors "have got it wrong and FIIs have got it right this time".

The undertone needs to improve in terms of fear factor, which is India VIX. The correction in Adani Group stocks should stop and the overall focus will shift to the budget and the Federal Open Market Committee, he said.

Sharma does not expect SBI to test levels of 500 on the downside; if it goes down, he advises investors to "nibble in".

He is positive on HDFC Bank Ltd. and advises investors to accumulate at 1,600 levels as the risk reward is favourable for a target price of Rs 1,800–2,000 in the coming months for a stop loss at Rs 1,535.

There is no fear of Adani Enterprises Ltd. or Adani Ports and SEZ Ltd. coming into the F&O ban, he said.

Adani Enterprises has not sustained for most part of the day below Friday's low. As long as it does not close below Rs 2,700, there is a strong case of a bounceback as the stock is heavily sold, he said.

According to him, the worst is behind in the short term for Adani Enterprises Ltd. Adani Ports and SEZ Ltd. stock has shown a 19% short build-up, and technical-level support is still far and way deeper, he said.

"If the group stabilises, we could see a bout of short covering as there are significant shorts at the moment," he said.

Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.