Derivative Market Update: Strong Rally Boosts Market Sentiment

The Indian stock market saw a strong rally on Wednesday, with investors rushing to buy undervalued stocks. The Sensex surged past 73,730, while the Nifty 50 closed at 22,337, both gaining over 1%.

Key Highlights from the Derivatives Market:

• Nifty March Futures closed at 22,441, showing a 104-point premium over the spot index.
• Before the rally, FIIs held large short positions in index futures (Nifty & Bank Nifty), while DIIs and retail investors were mostly long.
• The Nifty futures open interest (OI) dropped by 2%, while Bank Nifty OI declined by 7.8%, indicating some short covering.
• FIIs net bought 2,845 contracts of index futures, worth ₹410.57 crore, covering some of their short positions.
• Despite this, the FIIs long-short ratio rose only slightly from 0.20 to 0.21, meaning they still hold five short positions for every long.

Stock Futures Activity:

• IIFL saw a strong long build-up, surging 10.7% with a 50.3% increase in OI.
• Other stocks with significant buying interest: Titagarh, NBCC, Tata Technologies, KPIT Technologies, and IREDA.
• Polycab India, Deepak Nitrite, and Biocon saw short-covering, gaining up to 4%.
• Manappuram Finance is under the F&O ban for today’s session.

Market Outlook for Today:

• Analysts expect continued bullish momentum, mainly due to short covering by FIIs.
• Nifty resistance levels: 22,500 and 22,700.
• Options data suggests a bullish bias, with put writing shifting to higher strike prices.
• The Max Pain level at 22,400 indicates that despite volatility, bulls are likely to absorb declines in the near term.

Stay tuned for more market updates!