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FPIs cover record numbers of Nifty shorts

Both the short covering and cash buying have contributed to the Nifty’s 6 per cent rise.

, ET Bureau|
Oct 18, 2019, 07.37 AM IST
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Indeed the past few days have seen the near month Nifty open interest put-call ratio increase to 1.18 from 1.07.
Market sentiment is upbeat in the run-up to Diwali with foreign investors paring short index positions — Nifty and Bank Nifty — from record highs as well as buying in the cash market. From being net short by a record 142,760 contracts on August 29, they were net short at 28,740 contracts on October 16, indicating covering of a significant portion of bearish bets. From that day, they have also been net buyers of Rs 12,775 crore shares through October 17 (provisional figure). Both the short covering and cash buying have contributed to the Nifty’s 6 per cent rise to 11586 on October 17 over the same period.

Analysts like Rohit Srivastava of IndiaCharts and Amit Gupta, derivatives head of ICICI Direct, expect the Nifty to trend higher this month, and add that declining volatility was a “positive.”
fpi-graph

Indeed the past few days have seen the near month Nifty open interest put-call ratio increase to 1.18 from 1.07. The PCR is a contrarian indicator and shows that sellers are writing more puts as they believe the Nifty wouldn’t fall below the levels sold and premia received, in itself a bullish indicator. The immediate range for Nifty is 11400-12000.

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