The Nifty recovered over 3 per cent from its intraday lows and ended 47.6 points higher on Tuesday after the RBI reduced repo rates by 50 basis points. Derivative data suggests that Nifty is likely to extend gains.
The October Nifty future added 3.5 lakh shares in open interest (outstanding positions) and the premium increased to 32.55 points against 29.8 points earlier, clearly suggesting addition of bullish bets in the Nifty futures.
Similarly, open interest in the 7,600, 7,700 and 7,800 puts have increased substantially, which suggests that traders don't expect Nifty to fall below 7,800 in the near future. However, on the upside 8,000 level is likely to act as a strong resistance as the 8,000 strike Nifty call has further added 8.3 lakh shares in open interest.
Overall 45.1 lakh shares have been added to Nifty put open interest while 43 lakh shares got added to call open interest pushing the Nifty put-call-ratio (PCR) to 0.91 from 0.9 earlier. PCR is an indicator of market sentiment. A PCR of more than 1 indicates positive outlook about the market.
The India VIX or the volatility index fell 0.45 per cent to end at 21.57 as premiums on out-of-the-money options (options having zero intrinsic value) decreased as the uncertainty regarding RBI rate decision is behind us now.
Among individual stocks DLF, Dewan Housing Finance, Apollo Hospitals are expected to gain further as huge long positions have been added to these stocks. On the other hand Aditya Birla Nuvo, Arvind saw addition of bearish bets.