Derivative Data Suggests More Pain Ahead for Nifty

Respite from incessant selling in domestic stock markets is unlikely on Monday, according to derivatives data. 

Open interest (outstanding positions) in Nifty futures increased by 7.3 lakh shares, indicating build-up of fresh short positions. The premium in September future fell from 19.55 points on Thursday to only 9.3 points on Friday, suggesting addition of short positions, which led to contraction in future premium. 
 
On the options front, Nifty calls have added 47.3 lakh shares to open interest compared to 22.9 lakh shares to puts pushing the put call ratio (PCR) to 0.96 from 0.99 on earlier. This suggests that option sellers are more comfortable at writing calls than writing puts, as they expect Nifty to go down further.

Out-of-the-money (options which does not have any intrinsic value and the premium charged is only for time value) Nifty calls-7,600, 7,700 and 7,800- have added significant open interest indicating big traders don't see Nifty crossing 7,600-7,800 in the near term.

In case of put options, maximum open interest- 45.2 lakh shares- is concentrated at 7,500 strike with 7,200 and 7,300 puts seeing maximum addition of open interest. 

Addition of fresh shorts to Nifty futures along with open interest increase in out-of-the-money puts like 7,200 and 7,300 suggests that big traders are short on Nifty futures. They have bought Nifty puts to benefit from the anticipated fall in Nifty. This also suggests that big traders are planning to offload more Nifty stocks in the market.

The India VIX or the fear gauge increased 9.57 per cent on Friday to close at 26.42 suggesting higher anticipated volatility in the near future.