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Welcome to the analysis of FII, DII, Client and PRO data of their open interest in Index Derivatives (net open interest and daily changes in Nifty Open Interest and Bank Nifty OI) and Stock Derivatives (net open interest and daily changes in Stock Futures, Stock Call Options and Stock Put Options).

1. Macro And Global Factors

Before we proceed with todays open interest data analysis, let us understand few global / macro factors which are more relevant for NSE / BSE these days:

  • India VIX: After spending the whole day below 24 and contracting sharply during first 30 minutes of single sided trade, India VIX still closed above 23. In spite of volatility holding high, there was visible decay of weekly option premium. May be this is a sign that India VIX is going to be highly relevant throughout the month of February. 
  • Dollar Index: After two failed attempts to cross 91, dollar finally showed some strength and DXY is holding steady around 91.10. This is inspite of growing vocal support for GBP against USD. Can the green back again dictate the terms against all odds and write death warrant for liquidity flow to emerging market equity? This question is now about to be answered sooner than later. 
  • Oil and Precious Metals: Oil has resumed its upward journey while silver has given up most of the gains. Oil increasing and Dollar strengthening are two things you dont want to see if you a bull in Indian markets. These macro, however, have lost their charm against the fund flow in recent times.  
  • Daily RSI: Miraculous rise in Bank Nifty daily RSI from below 40 to 70 today says that both momentum and strength both are backing it to continue the upward journey. Nifty RSI is around 61. Both indices have a long way to reach the caution levels of 80 therefore, the gap we saw today might well be a run away gap for a long time and any attempt by indices to bridge this gap may be an opportunity to buy. 

2. Participant wise open interest data

Previous Days FII, DII, Client and Pro Data || Open Interest Analysis

Latest FII, DII, Client and Pro Data || Open Interest Analysis

Todays Participant Wise Open Interest - Index Charts


Todays Participant Wise Open Interest - Stock Charts


Now let us discuss this numbers in detail.

3. Clients Open Interest Data:

(How Clients participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)

  • Clients (UNFORTUNATELY retail investors) had prepared themselves for a fall in indices which didnt go as they expected and ultimately today Clients have bought 49k net longs in index contracts which makes them net longs.
  • While rest of the participants are standing firm on their outlook of the market and net open interest, Clients have swung back from short to long which was primarily by buying index call options (54k). So if todays movement was a bull trap, only clients are caught into it.
  • With almost all the stocks roaring past their all time highs, Clients, in spite of the perfect opportunity to book some profits in their humongous gross longs in stock futures, decided to hold and even add some more longs to it.
  • With total gross longs in stock derivatives of 1.3 million contracts against gross shorts of just half a million contracts, fully exposed longs in stocks, constant refusal to book profits or cover the position all these reflect unwavering faith of Clients into the fund flow that India is experiencing at the moment. 

4. DII Open Interest Data:

(How DII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives)

  • DII, as usual, tried to counter the buying of FII in cash market but fell significantly short.
  • Today DII also added new shorts in index futures while covered a small quantity in their already towering shorts in stock derivatives.  

5. FII Open Interest Data:

(How FII participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):

  • FII has again pumped in huge funds (6k Crs) in cash market today this negates their large sale number of pre budget day. MSCI first quarterly review shall be posted on 9th February. Typically we must expect to see  FII ramping up derivatives position in stocks which are likely to be added and then buy in cash market on announcements.
  • In indices, FII today booked profits in 9k futures, added fresh long in call options (15k) and interestingly added 18k long in index put options. Now FII are carrying 113k net long in index put options, last time we saw FII paying premium for index put options, they got to encash it and if this time they get to profit on their longs in index put options it would be at the expense of Pro.
  • FII got to book profits in some of their stock futures (14k) and also added net short in stock call options (3k). All in all their not longs reduced by 19k today, however, their gross longs in stock futures continue to hold at 666k slightly lower than yesterday.

6. PRO Open Interest Data:

(How PRO participated in Nifty Open Interest, Bank Nifty Open Interest and Stock Derivatives):

  • Pro in spite of being only net long participant in indices could not fully earn the upside market presented them with, largely due to their position being heavy on option writing.
  • Today they had to book losses and cover (18k) index futures short, wrote more index put options (17k) and the biggest play also wrote 69k index call option today. Now they are the only and official option writers for indices. Just to being perspective, their gross shorts in index put options are now more than half a million contracts.
  • With additional writing of stock call options as well Pro are now net short of 121k stock call options which are bought by clients. Pro are now fast approaching gross open interest quantities of Clients in stock call option short (208k) and stock put options long (123k). Both bearish play. 

7. Open Interest Data converted in Exposure to Volatility

(Risk exposure for each participant - Client, FII, DII and Pro in case of sharp movement in Index and Stocks in either direction):

  • Long positions can be created by Buying of Call Options or by Selling of Put Options. Even though both are longs, the risk reward to participant are extremely different.
  • CALL BUYERS take risk equal to premium paid and shall only lose the premium amount in case of downward movement. However they participate and earn fully in case of upwards movement of the underlying asset.
  • On the other hand, PUT SELLERS earn only the premium amount and nothing more in case of upwards movement however they take unlimited risk and loss in case the underlying moves downward.
  • Therefore, it is not sufficient to only analyse NET LONG or NET SHORT positions but also to consider the nature of this position which shall reveal more details like which participants shall look to buy in case of dip (may be to protect their shorts in put options) and which shall look to sell in case of rise (may be the participant with highest short in call options).
  • To account for this, we have mapped each participants open interest data with the nature of open interest and converted it into their EXPOSURE TO VOLATILITY in Index and in Stocks.


8. FII, DII, Clients and PRO - Exposure to Index Volatility

(Nifty Open Interest and Bank Nifty Open interest including Futures, Call Options and Put Options)

  • Clients have learned from FII and are now positioned not to lose money howsoever indices move, by migrating from futures to options play. 
  • DIIs exposure on both sides is clearly a bear play and a very stable one in terms of quantities. 
  • FII are the BIGGEST BENEFICIARIES irrespective of the direction of indices. One would always want to be in this position when the rest are taking cue from what they are doing.
  • Pro have intensified option writing today which now makes them most exposed of all participants. Losing the MOST, that too EITHER SIDE in case indices move sharply. Volatility is they biggest enemy at this stage. 

9. FII, DII, Clients and PRO - Exposure to Stocks Volatility

(Stocks Open Interest covering Stock Futures, Stock Call Options and Stock Put Options)

  • Retail investors are taking every opportunity to build up longs that too naked which is taking them almost to the size of DIIs open interest. 
  • FIIs while still holding heavy gross longs in stock futures are fairly covered in their exposure on net basis but still continue to be mild bulls only.
  • DII are the only bears in stocks simply on account of their huge cash market position, a small portion of which stands hedged as short in stock derivatives. 
  • Pro are expecting to keep stocks also from running away either side. Their first choice however would be on the lower side as they have collected a little too much premium already on the call options. 

I am privileged to have readers who are well informed, technically sound and fairly active in the market. I know its not a cake walk to tolerate my long blah everyday and especially when you navigated the whole article and reached here, it gives that you are an avid (tolerant) reader. However, market needs one more ingredient for a perfect flavor which is reading psychological play also. Therefore it seems pertinent to bring out a psychological aspect which I have observed over last two days with the FITTEST TRADERS (to my belief). These are the most conservative lot - never seen them take any trade without Stoploss and always keen to cut down losing trade first. This lot I believe is the fittest to survive all weathers of the market. These, for last two days, are now saying - prices are always coming back to our levels, we must not bother with correction that much. This is an eye catching phenomenon for me that how market can manipulate psychology of traders to its advantage. I am not at all failing to recognise the flow of funds, sky rocketing fundamentals and vibrancy of our economy. In fact, I believe Indian economy is at its best and the growth expectation is such that current PE levels will be more than justified by FY22 earnings. No doubt. However, this turn in the psychology of traders is troubling me and is advising me to become most cautious even though we are right in the middle of the best bull run of our life times, this is also in part because of what a wise man said about when to be greedy and when to be cautious. The operative word here is to be CAUTIOUS, not in denial or negative. Keep riding the trend thats what you are here for. However, ensure to adhere to stricter and tighter stop losses for your trades just to honour the psychological play. Not that the market is not kind, but when does it let the euphoria settle and ask us to brace before a nose dive?

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