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Nifty index futures closed 0.73% lower at 10827.65 on Wednesday. Open interest rose by 2.6 lakh contracts indicating the continuation of short build up, while premium further rose from 38.25 to 44.75. Build up of fresh shorts in the Nifty OTM strikes induced a dip in PCR OI from 1.7 to 1.63. India VIX surged marginally ahead and closed higher at 18.39 against previous day's 18.1.
FIIs exhibit pessimism especially in index futures
FIIs exhibited a strong negative bias in the derivative segment especially in the index futures. Exposure in index future shorts rose by 22972 contracts on Wednesday and now their net short positions are at 51% of the total exposure in index futures. However, activity in index options witnessed erosion of Put longs by 17483 contracts and simultaneous addition of Call longs by 8613 contracts. They also added to their exposure in index Put shorts by 4912 contracts. In stock futures, FII activity depicted a strong negative bias as they reduced exposure in longs by 10196 contracts and added shorts by 9166 contracts.
OUTLOOK: Volatility to rise in the near term; 10700/10600 to provide interim support
Call writing in all the OTM strikes between 10800 and 11200 indicates the prevailing pessimism in the market. Additionally, maximum Put - Call open interest concentration at a 1000 points wide range (at 10000 - 11000 strikes) suggests potential for higher volatility in the near term. Even though on a lighter footing, Put longs build up seen at 10700 and 10600 strikes may provide initial supports near those strikes.
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