FIIs create shorts worth Rs. 2000 crore - ICICIdirect

The week started with some optimism with a move from 5680 to 5750. However, FIIs again created shorts to the tune of Rs. 2000 crore. As a result, the Nifty tanked close to 3.5% from 5750 to 5535 during the week. The private banking, technology and NBFC space witnessed selling pressure. Buying was seen in select stocks from defensive sectors like FMCG and pharma.

The Volatility Index (India VIX) has once again closed above its important 200 DMA levels. The repeated moves towards this level may act as further deterrent for equity markets. We believe selling pressure may be observed as FIIs are still continuing to buy OTM Put options.

The 5600 Put, which held the highest open interest base started seeing closure when the Nifty came below the 200 DMA of 5630. The buying later was seen in OTM Put options of 5400 and 5300 strikes. At the same time, continuous addition was observed among ATM and OTM Call strikes.

Nifty: Nifty has breached its major support of 5630. We expect selling pressure to continue towards 5400. On upsides, the Nifty is not expected to sustain at higher levels. Even on any short covering, it is likely to face stiff resistance at 5740 where FIIs had created major shorts.

Bank Nifty: The banking index has immediate resistance at 11200. Selling pressure among banking heavyweights may intensify if the Bank Nifty remains below these levels. On the lower side, 10500-10600 is expected to remain a major support.

The first week of the new series has attracted significant short positions in auto and cement stocks. Banking and metal stocks also observed continuous accumulation of short positions. Closure of long positions was seen among technology heavyweights. The telecom and textile space also observed closure.

Source : Equity Bulls

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