Flat Nifty OI data hints at trend reversal

By Hemant Nahata of IIFL

The Nifty ended the previous week on a flat note making a Doji pattern on the weekly candlestick chart. The Nifty OI remains flat (since expiry) indicating market trend could reverse or remain sideways for the near term.

In fact, the indecisiveness started from March rolls, where it turned out to be below average, indicating low conviction from traders to carry their position into the new series. April being a truncated month, we might see volatility shooting up in the near term.

VIX has already surged to 25 per cent as against 22 per cent the previous week as we enter the election phase. The participant wise OI data indicates FIIs long/short ratio on index currently stands at around 4.2x.

FIIs’ total long contracts on index futures stand close to 2.9 lakh (Maximum at aropund 5 lakh contract in previous expiry) and total short index position at 69K. The cost of carry for Nifty has gone up for the past two trading sessions to 0.66 as against 0.50 levels during the start of the expiry.

On options front, 6700 strike has the maximum concentration for the current expiry. The current PCR OI stands at 1.06. PCR has been trading within the band of 0.96-1.20 since January 2014. Last three expiries in January, February and March have closed near the trough or at the peak.

April options data doesn’t indicate any huge build-up which may restrict the move (either up/down) at a particular strike. Private banks and large cap goods stocks are exhibiting weakness.