By Anand James
The July collection began with FIIs holding 85% of their index futures positions as shorts. This constitutes 35% of the whole brief positions held by all members within the index future phase. This is eerily much like the February 2020 ranges, previous to the covid collapse. However, what’s completely different is, in 2020, VIX was benign within the 10-11 neighborhood and the sharp rise in VIX thereafter took markets by an enormous shock, exacerbating the pace and extent of the collapse. In stark distinction, VIX is at 22, suggesting that the market is far more ready than 2020 to deal with surprises. However, that is nonetheless method decrease than March peaks, regardless that Nifty has largely declined through the March-June interval. This is uncommon, since VIX shares a powerful however inverse relationship with Nifty.
Meanwhile, the July collection has began with OTM CEs and PEs seeing brief construct up. This together with comparatively decrease VIX, level to the potential for a sideways buying and selling, or could possibly be seen as an indication that merchants are adopting premium scalping methods reasonably than anticipating directional strikes, at the same time as charts are pointing to a transfer larger.
Among sectors, Autos confirmed the very best lengthy rolls, persevering with related bias of final month as effectively. This is a optimistic signal, with M&M shifting to a brand new 52W excessive. Meanwhile, brief rollovers have been the very best in capital items, financials, client durables, metals and oil & gasoline, most of which additionally had discovered FPI promoting in money.
With these in perspective, our first leg of the bottom case situation sees Nifty heading to the 15850-16200 band this week adopted by consolidation. This could possibly be adopted by the second leg that goals 15000-14700, the place PE brief construct is the very best. And thereafter 14000. But this leg will rely completely on how VIX fares within the 15850-16200 area. If VIX continues to ease, we may see a shock transfer larger. It could be revealing to notice how 16500 performs for the success of such a transfer, as a result of that’s the place OTM CEs have been bought probably the most final week.
If 16200 is cleared, we could count on to see FPIs beginning to cowl their abnormally excessive shorts, which in flip may add extra legs to upsides. Clearing of this mark may open floodgates for 17000 which might full a 68% retracement of the down transfer which began in April 2022. This is our optimistic situation.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are the creator’s personal.)
Source: www.financialexpress.com”