Domestic markets are expected to see volatility amid weak global cues and the expiry of monthly F&O contracts on the NSE. Gift Nifty at 22735 indicates a gap-down opening of nearly 120 points, as Nifty June futures on Wednesday closed at 22,856.
According to analysts, the settlement of May derivative contracts on the NSE will add to volatility. Though foreign portfolio investors have turned net sellers in the cash segment, they have surprisedly turned bullish in the F&O segment.
“The long short ratio (LSR) of the Foreign Portfolio Investors (FPIs,,) rose further from 51.83 per cent on May 27 to 53.96 per cent on May 28 as they continued to build long positions and cover short positions in Index futures for the fourth consecutive day,” said Ashwin Ramani, Derivatives & Technical Analyst, SAMCO Securities
Put writers (Bulls) exiting and call writing additions was observed at the 22,900 and 23,000 strikes, which kept the Nifty under pressure throughout Wednesday, he added. Strong call writing (Bear activity) was also observed at the 22,800 Strike in Nifty, adding that the maximum call open interest is placed at the 23,000 Strike while the maximum put open interest is placed at the 22,500 Strike. “An uptrend is unlikely to resume unless the 23,000 level is taken out successfully,” he further said.
Avdhut Bagkar, Technical and Derivatives Analyst at StoxBox, said escalating tensions in West Asia and investor anxiety ahead of the general election results, due next week, are weighing on market sentiment.
According to Siddhartha Khemka, Head—Retail Research, Motilal Oswal Financial Services Ltd, all eyes will now be on Core PCE data, which is elementary for the US Fed’s interest rate decision.
“On the domestic front, though FII selling intensity has reduced, the caution is increasing as we near the big event outcome which is resulting in profit booking. The volatility is expected to heightened in coming sessions, thus its advisable to traders to stay on sidelines and not get too aggressive,” he advised
Equities across the Asia-Pacific region are in a sea of red, led by Japan’s Nikkei, which tumbled over 2.2 per cent in the early session on Thursday. Others such as Australia, Korea and Tailwan are down between 0.5 per cent and 1 per cent.
“The weak global cues are further adding to the nervousness and thus markets are likely to remain weak in near future,” he cautioned.