After being net sellers since October 12, barring two sessions on October 19 and 21, foreign institutional investors (FIIs) turned positive in index futures on November 2. Overall, they bought equities worth Rs 15,400 crore in October. In the F&O space, activities were mixed on the FII front. While they sold worth Rs5,881 crore in index futures, they bought to the tune of Rs6,288 crore in the stock futures segment during the week ended October 30, 2020. FIIs bought index options worth Rs3,414 crore during the week ahead of the US Presidential elections. FPIs were net buyers since May, except September, as their net buying was Rs14,537.4 cr in October and net selling was Rs9,981.01 cr in September. After touching highest level of 83.61 on March 24, when nation-wide lockdown was announced, volatility index ‘India VIX’ has been rising from the low of 18.35 on August 28. India VIX is hovering at 24.92 level.
After trading hours on Monday, the Put-Call Ratio of Open Interest (OI) for NSE Nifty was at 1.0135, while highest Call OI was at 12,500 strike and highest Put OI was at 11,500 strike. The US elections and lockdown in several European cities amid second wave of Covid-19 triggered a sell-off in risk assets last week. However, announcement of increased MSCI weight for India kept downsides limited, while the Nifty ended the October series below 11,700. The volatility across the global markets continued to rise and India VIX also rising towards 25 level. The Nifty exhibited extreme volatility along with weakness in global markets but was able to end the October series near its volume weighted average price (VWAP) level of 11,700.
FII trading in cash market was positive during the October series as they’re net buyers to the tune of Rs15,048 crore. However on the derivative side, FIIs seem to be chary of holding long going ahead of the important event of the US Elections and Bihar assembly elections, both of which are scheduled in November month. FIIs began the November series with net short in index futures of 12,000 contracts, however the quantum of their net short is not much and their long short ratio stands at 45 per cent. According to data on ICICI Direct.com, while FIIs remained net buyers in Indian equities, the NSE Nifty remained largely range bound. The major inflow of Rs3,589 crore was seen on October 27 on expectations of increased weight of India in MSCI indices. However, they bought almost Rs3,478 crore in equities during the week. Domestic financial institutions (DIIs) were net sellers at higher levels and sold almost Rs3,694 crore in equities during the week. For October, net FII investment in equities has remained positive. They bought around Rs19,640 crore in equities and Rs1,641 crore in the debt markets.
Witnessing its fifth monthly rise in 2020 year, F&O space concluded October series with eight per cent gain. The monthly derivatives series closed on positive note in April, June, July, August and October. Coming to F&O rollovers to November series, the Nifty Futures began with an OI of 1.05 crore shares from previous 0.84 crore shares in OI. The November series started with Rs98,189 crore as against Rs 90,264 crore and Nifty futures with Rs12,305 crore versus Rs9,096 crore. Index options recorded Rs1,26,614 crore versus Rs1,17,755 crore and stock options witnessed Rs27,518 crore versus Rs25,044 crore. The NSE Nifty’s rollover to November was 77.45 per cent as against 70.63 per cent in October series, 3-month average of 76.05 and 6-month average of 76.55 per cent. Bank Nifty November month rollover is at 73.59 per cent versus 79.05 per cent. The market-wide rollover is at 92.85 per cent versus 92.51 per cent. The NSE Nifty started the November derivatives series with 10 million shares again 8.5 million shares seen in the last series. The roll spread in both the Nifty and Bank Nifty turned negative suggesting marginal short formation ahead of the US election output.
The October series recorded the expiry with a very low OI of just 83 lakh shares, The Nifty witnessed a sharp pull-back from 10,800 to around 12,000 level. Despite some selling pressure, it closed the October contract with significant gain of eight per cent. Majority of the upmove in Nifty was backed by significant long addition as month-on-month, the OI in the Nifty rose by 26 per cent. Analysts forecast that the rollover of 77.45 per cent against 3-month average of 76.05 per cent was on the mix side as rollover cost fell by two points. Nifty recorded most of the rollover on the longer side. The Bank Nifty outperformed Nifty as it closed with a spectacular gain of 17 per cent with five per cent fall in OI indicating short covering in the index. Rollover in the Bank Nifty was bit on the lower side at 73.59 per cent as against 3-month average of 77.42 per cent.
The writer is a business journalist with 27 years of experience