Are FIIs Becoming Short-Term Bears in Their Nifty Bets?

The NSE Nifty 50 Index declined 1.2 percent on Thursday, its biggest fall since the global selloff triggered by the Brexit vote in June. While the index dropped, its August futures saw an addition of 3.8 percent in open interest, indicating a build-up of fresh short positions.

The Nifty Bank Index saw long positions unwind as the gauge declined 1.6 percent, along with a fall of 3 percent in total open interest.

More Index Puts for FIIs

Foreign Institutional Investors (FIIs) and proprietary desks together bought 41,756 index put contracts and unwound 7,882 index call contracts on net basis. This indicates near-term bearishness on part of the FIIs even though they continue to buy in the cash market and hold nearly 7 long positions in index futures for 1 short position held.

Options Writing Shifts to Lower Levels

Maximum open interest continues to build up in the 9,000 Call and the 8,500 Put. However, writing activity shifted to lower levels.

Nifty's 8,800 August Call saw an addition of 10.8 lakh shares, and is now witnessing second highest build-up of open interest.

Meanwhile, writers took advantage of increase in Nifty's 8,300 Put premiums. The 8,300 Put option saw an addition of 10 lakh shares in open interest.