prathamaggarwal
Education

BIG GAME BEING PLAYED!!!! WHERE ARE WE HEADING? (PART 2)

NSE:NIFTY   Nifty 50 Index
THIS IS THE SECOND PART OF THE ANALYSIS ON NIFTY FALL. IF YOU NOT READ THE PREVIOUS ONE, PLEASE READ THE SAME FOR BETTER UNDERSTANDING. I HAVE ALSO SHARED ITS LINK BELOW.

Exactly as per our prior observation, On 11 October Nifty and Bank Nifty crashed 300/800 Points at opening and thereafter showed a little recovery. However it ll be incorrect to assume any relief as of now.

Now In continuation to the first part, As on 11 October 18, FII has closed their longs amounting to 10K and have further added 6.3K Shorts. Now the earlier shorting has increased to 97K (approx, mind you, on 17 September it was 44K, and Nifty/Bank Nifty fell 400/1100 points to clear that.)

I presume with Dollar Increasing, IT Sector is a direct beneficiary. And whatever long positions FII had in Index were in IT Sector. However over the past 2 days, even IT sector has started falling. Reasons for falling IT Sector despite rise in Dollar? Some general correction, and bad results. Tata Elexi despite being a direct beneficiary of Dollar failed to post good results. Also, Even TCS posted just in line results. Mind you These 2 companies were exceeding the estimates in all the prior results. As a result Tata Elxsi fell upto 15% on Result day and TCS fell upto 7-8% before posting result (probably due to bad expectations of result).

So, those 10K longs might be pertaining to IT sector which are now being closed. So IT sector might stay in pressure in coming days. Nifty 50 has around 12% allocated to IT Sector. Any drastic fall in IT can drag Nifty big way. The market probably recovered today, so FII could exit their 10K Long positions.

Further, as already informed, shorts have been increased to 97K. (6.3K Added today on 11 October)

If we talk about call Options. FII Have net 44K Calls in comparison to mind blogging 210K Puts. Put Call Ratio is 5:1.

So when do you take 5 Puts and just 1 Call?

You already know the answer.

Just one advice : Save your money right now. You will get ample of opportunities in the coming month. Trust me ample of.

Feel free to ask queries and share concerns. These are just my thoughts, and my view to the things going around. I hope it Helps.

Thanks.
Oct 11
Comment: 10K longs might not be totally pertaining to IT Sector. However alot of part of IT Sector would gave been covered now!
Oct 19
Comment: Some extract from the above description shared on 11 October.

"So, those 10K longs might be pertaining to IT sector which are now being closed. So IT sector might stay in pressure in coming days. Nifty -1.24% 50 has around 12% allocated to IT Sector. Any drastic fall in IT can drag Nifty -1.24% big way. The market probably recovered today, so FII could exit their 10K Long positions. "

Mindtree, TCS, Infy falling? :)
Pratha. When you mention that FIIs have xyz CE and ABC quantity PE of NIFTY, kindly specify whether they have written or have they bought. The thought might be clear in your mind but it does not get conveyed unless that is specified. You have made a good attempt to explain your idea, but you have no taken into account the weightage HDFC and RIL have in the NIFTY. IT can keep falling and if these two are going up, as they will if USDINR heads back towards the mean level of INR 70, then NIFTY will only go up. RIL alone has 40 % weigtage in NIFTY !!
So FII activity needs to be seen in the context of writing PEs or writing CEs in the index options.
Just in my humble opinion.
:)
Reply
@amit69, Thanks for your opinion amit. I appreciate your attempt to critically analyze my post. Lets not create a hypothetical situation of HDFC RIL rallying without any cause, Or Dollar jumping to 70 in a day.

And as far as FII Activity is concerned I find futures data is more relevant in comparison to Call/Put Data.

And in respect of CE / PE - I am talking about net bought. But Yes I Acknowledge the fact that some readers might find it difficult to interpret. I will take that points into consideration for sure.


All healthy discussions appreciated :)

Reply
amit69 prathamaggarwal
@prathamaggarwal,Thanks for your reply. My point. Mkt moves not because of you and me and others but because instituations see value in it. The Instituations who are likely to see most value are the FIIs who are driven to deliver returns better than the parent country of their investors, with minimal risk ratio. With that as a reasonable hypothesis, if are FIIs are buying, since their fund is bigger than DIIs ( and be cant dispute that), they will WRITE / SELL PEs, and NOT BUY CEs. And vice versa. PEs/ CEs are written by big money since its their buying / selling that influences the market. And if they are sure that they are taking the mkt up ( Indian mkt , for example) , they will write PEs and not buy CEs. Ofcourse they will obviously hedge their positions since they need protection incase a BLACK SWAN event does occur.
BTW: USD will not depreciate v/s the INR to 70 in a day !!!, Its where it is headed, in the future, hence my reasoning about HDFC etc. Again my rebuttle to your post, this is what it is. I hope you take it in the spirit of a healthy discussion. if wrong, It would be a learning experience, as always.
Would love to hear your views about about why the HDFCs should not be going up as a re- rebuttle to my point.
Thanks
Reply
@amit69, Its a fact that since writing CE/PE requires huge money, we expect it to be done by Big Market Players "FII", as normal retailer do not have enough capital. But this is a misconception that they do not buy it. If you see the open interest as available on NSE website, they clearly mentions the number of CE/PE they have longed and how much they have short. Also, they are generally Net Long in CE/PE (i.e. they buy more than they sell). Since selling is only associated with them being big market players we tend to believe that they only short.

Also, Let me share a deep secret with you. Many a times, Big Intraday moves comes in Indexes when FII becomes buyer. If you see 300 Points up and then 300 Points down. Feel free to presume that the high buying volumes are directly associated with FII purchasing option.

Example : As a norm, If PCR is more than one i.e. Total Numbers of Puts written are higher than Calls, the market is expected to go. But alot of times we witness that market aggressively goes down towards the Put of Highest Open Interest breaks it, creates an unwinding over there and switch direction again. (Intraday). In these scenario, FII are buyers of PE. This was witnessed constantly in Feb-March session during Budget.

Also, I am researching on this, the movement of VIX has some correlation with FII buying.

I am not saying whether the movement of HDFCs will be up or good. Hypothetical situation of HDFCs / Reliance rising and taking entire market up is not acceptable. Share charts / reasons. Then I will definitely share my point of view.


PS : Learning is always a first priority:)

Thanks.
Reply
What do you think of the possibility of niftyfuture discount of 100+ nifty cash hitting all time high.
Awaiting reply!!
Reply
prathamaggarwal Optiontrader777
@Optiontrader777, Why would you ask that? I Did not got your point.
Reply
very good analysis..
is there a way we can get a glimpse of FII activities... One thing that intrigues me is ,when shorting is banned how can one carry short positions...
Reply
sirlaxmanagarwal maratakidki1
@maratakidki1, SHORTING IS BANNED IN CASH NOT DERIVATIVES..
Reply
maratakidki1 sirlaxmanagarwal
@sirlaxmanagarwal,

ftures pric is a function of cash/spot price? ,,,, are spot prices affected by future price or future price by spot ...r else spot prices ar being manipulated?
Reply
sirlaxmanagarwal maratakidki1
@maratakidki1, futures is derivatives.. It doesn't have any value.. The value depends on underlying ie spot price.. Learn basics of stock markets.. That will be helpful..
Reply
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