Rising open interest in F&O a worry

The BSE Sensex and the S&P CNX Nifty opened with a big gap and remained at higher levels taking the cue from the rising markets across the globe. Auto, banking, cement and metal sector shares contributed the most to today’s rally.

The worry now is the mushrooming open interest positions, which have shot up to an all time high level of Rs 83,000 crore (Rs 60,000 crore in futures and Rs 23,000 crore in option). Thus, the open interest has increased by whopping 46 per cent or by Rs 26,000 crore since the beginning of the July expiry series.

The market has seen a one-sided movement from 3555 on March 3 to today’s level of 4504.55. A correction is expected and this will bring overextended stocks out of their overbought zone. The correction will act as an opportunity for traders to take positions again.

The Nifty 4400 - Thursday's resistance — is now becoming the support level. Operators now have shifted their resistance level to 4,500 as open interest in 4,500 Call options increased by 98 per cent to 13.87 lakh shares.

While doing so, they have started covering their positions in 4200-4400 Call options, as the open interest in these levels declined today.

The support has been built at 4,400 levels as the open interest at 4,400 put options increased by 7.64 lakh shares to 28.72 lakh shares today. With Nifty crossing the 4,500 levels today, new support is building at that levels. The 8.21 lakh shares added at 4,500 put options, took the OI to 11.70 lakh shares.

Strong support continued to be around 4,300 levels with the put open interest of 46.83 lakh shares built at that levels.

Markets displayed enormous strength as buying was evident throughout the session backed by gains in global indices.

The turnover increased by over Rs 5,000 crore to Rs 48,900 crore on the NSE. The put/call ratio rose to 1.63 from 1.54 as 24 lakh shares were added in put options, while 6 lakh shares were added in call options.