Nifty 50 Faces Decline Amid Increased Short Positions in F&O Segment
On Monday, January 6, 2025, the Nifty 50 index took a sharp knock, falling 1.3% or 300 points, trading around the 23,700 levels as of 12:30 PM. The Nifty January futures mirrored this dip, dropping over 1% to 23,800 levels, with open interest (OI) rising by 1%. The premium in Nifty futures narrowed to about Rs 100, indicating a weakening outlook.
Meanwhile, February Nifty futures saw a 1% decline in OI, whereas the far-off March Nifty futures experienced a significant rise in OI, up by 12.6%, suggesting increased activity at longer-term horizons.
F&O Market Insights:
As per data from the NSE Futures & Options (F&O) segment, foreign institutional investors (FIIs) held nearly 5 short (bearish) positions for every long trade in index futures as of Friday, January 3. This shows a bearish sentiment among institutional investors. Conversely, retail investors held more than 2 long positions for every short, indicating a more bullish outlook from individual investors.
Stocks with Significant Short Position Build-up:
Several stocks saw a notable build-up of short positions on Monday, with Union Bank leading the pack. The stock witnessed a dramatic 54% increase in OI but tumbled nearly 8%. Other stocks experiencing a similar trend were Dabur India, KEI Industries, and Max Financial Services, which saw up to a 10% rise in OI, with price declines in the range of 2-4%.
Notable stocks with similar trends included JSW Energy, IRB Infrastructure, Supreme Industries, SJVN, and Adani Green, all showing an increase in OI amid falling prices, indicating short positions being built.
Long Unwinding:
There was also significant long unwinding in several stocks. ITC was a prime example, trading around Rs 450, down 6.5%, with a sharp 74% drop in OI in a single day, as the stock traded ex-hotel business. Ramco Cement, Angel One, IPCA Labs, and Manappuram Finance also saw some long unwinding, indicating the closure of long positions.
Stocks Showing Positive Momentum:
On the positive side, Dr. Lal Path Labs saw a 2.5% rise in stock price, backed by a 40% increase in OI, signaling long positions being built. Similarly, Metropolis Healthcare gained nearly 2%, with a 19% rise in OI. Other stocks that saw buying interest included Nykaa, Jubilant Foodworks, Mahindra & Mahindra Finance, and Tata Consumer, all showing signs of long positions being initiated.
Additionally, RBL Bank, MphasiS, and Bajaj Finance saw a dip in OI while their stock prices edged higher, indicating the potential closure of short positions at these counters. Paytm also rose by 1% as OI dropped by 2%.
