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HomeMarketStocksIs high premium play in Nifty F&O a winter chill for D-Street...

Is high premium play in Nifty F&O a winter chill for D-Street traders?

The December spinoff sequence which started on November 25, kicked off on a bullish word as benchmark indices hit contemporary lifetime highs in each single day of the sequence, barring Friday.

The aggressive lengthy positions taken by overseas institutional traders (FIIs) has stored the premium of the Nifty 50 December futures contract to the spot index stage increased at greater than 100 factors for the reason that begin of the sequence. It has sustained regardless of the closure of some lengthy positions on Friday.

On Friday, Nifty 50 index ended 0.6% down at 18696.10 factors. The Nifty 50 December contract settled at 18812.55 factors, down about 136 factors from the earlier shut.

Firstly of the sequence, Nifty 50 December contract traded at a premium of about 142 factors to the spot index, which narrowed to 116 factors as of Friday, however it nonetheless stays on the upper aspect.

Such excessive premiums normally point out that the market is overstretched and that one must tread cautiously.

This time, nonetheless, the commerce set-up isn’t giving any indicators of fatigue among the many bulls, in response to analysts.

“…When markets transfer in a linear vogue (upmove), intermittent bouts of revenue taking make market texture wholesome. Nonetheless, market breadth indicators counsel that we haven’t actually ventured right into a territory the place you need to be cautious,” Sriram Velayudhan, vice

president – various analysis at

instructed ETMarkets.

Firstly of the December sequence, FIIs have been internet lengthy of 8,79,500 contracts in index futures, in contrast with 2,32,800 contracts firstly of the November sequence.

“FIIs’ internet longs in index futures are one of many highest seen within the final 3 years, and until we don’t see any main lengthy liquidation, decline (within the index) ought to be restricted,” mentioned Raj Deepak Singh, head – spinoff analysis at


Even when the upcoming occasions like RBI’s financial coverage, macroeconomic information factors, and world markets result in some intermittent promoting, analysts are assured of the Nifty 50 persevering with its northward journey.

“We stick with our goal of Nifty testing 18,800-19,000 ranges within the December sequence. We might be patrons of dips,” Velayudhan mentioned.

With the general bias remaining optimistic, Singh of ICICI Securities doesn’t anticipate the Nifty 50 to breach 17,800-18,000 ranges on the decrease aspect within the coming weeks.

The opposite parameter which means that there is no such thing as a signal of panic out there is volatility. India VIX, also referred to as the ‘concern gauge’ is buying and selling under 14 factors, which is the bottom stage in 2022.

What do choices say?

Bullish bets have been fairly aggressive within the choices section too, because the open curiosity has nearly doubled in absolute phrases within the December sequence. That is inflicting some fear to a couple analysts.

“From about 4 crore, OI (open curiosity) has doubled to eight crore in index choices. If this quantity strikes additional as much as say 12-15 crore, then that might draw some panic out there,” a spinoff analysis analyst at a home brokerage agency mentioned.

The 19,000 strike worth name possibility of the Nifty 50 holds the best open curiosity, and the contract noticed robust addition in open curiosity even on Friday.

This means that the bulls are all set to make Nifty 50 obtain the “19000-level” milestone on this sequence.

(Disclaimer: Suggestions, solutions, views and opinions given by the consultants are their very own. These don’t characterize the views of Financial Occasions)

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