The Nifty ended 72.8 points lower, below the psychological level of 7,800 on Monday suggesting caution among the traders prior to the key RBI monetary policy event on Tuesday. However, the derivative data suggests that Nifty is likely to remain positive on Tuesday with upside capped around 7,900 levels.
Open interest (outstanding position) in Nifty October future increased by 3.3 lakh shares and the premium on Nifty futures increased to 29.8 points from 27.2 points earlier, clearly suggesting addition of bullish bets, hence Nifty may gain. This view is also supported by the fact that the in-the-money (options having positive intrinsic value) 7,800 strike put options have seen addition of 3.5 lakh shares in the open interest.
However, gains if any will be capped as Nifty calls have added 49.9 lakh shares to open interest while puts have seen addition of 29 lakh shares to open interest. Both 7,900 and 8,000 strike price Nifty calls have added open interest in the range of 4-5 lakh share, suggesting near term resistance for Nifty in the 7,900-8,000 range.
The put-call-ratio (PCR) fell to 0.9 from 0.93 earlier. PCR is a sentiment indicator for the market. A PCR of more than 1 is considered as a bullish sign. The India VIX or the volatility index ended 3.76 per cent higher at 21.6675 indicating higher anticipated volatility in the near future.
Among individual stocks Dr. Reddy's Lab and HDIL saw addition of bullish bets while, Coal India, OIL and L&T witnessed addition of bearish bets.