Has Nifty50 reached a vertical limit? Derivative data suggests so
Has the Nifty seen its near-term peak? It seems so. The index hit an all-time high of 9,218 last week and has corrected since then. Market experts are taking a cue from the raise in the ratio of stocks traded in the derivative market versus the index to gauge the quantum of leveraged positions.
Last week, the ratio of open interest (OI) in stock futures was recorded at 3.2 times higher than index futures, which meant traders were taking highly leveraged bets on stocks. The combined OI in stock futures segment on the NSE stood at over 4.53 lakh contracts versus OI of over 1.53 lakh contracts in the index futures segment that includes OI in Nifty and Nifty Bank and other indices.
"History shows one needs to be careful of over-leveraging in stocks," said Rohit Srivastava, fund manager, Sharekhan. Usually, many market tops are made when the ratio of stock futures OI is between two or three times that of index futures OI. This time too it seems Nifty could have hit its top for some time. The chart gives an interesting trend."
Last week, the ratio of open interest (OI) in stock futures was recorded at 3.2 times higher than index futures, which meant traders were taking highly leveraged bets on stocks. The combined OI in stock futures segment on the NSE stood at over 4.53 lakh contracts versus OI of over 1.53 lakh contracts in the index futures segment that includes OI in Nifty and Nifty Bank and other indices.
"History shows one needs to be careful of over-leveraging in stocks," said Rohit Srivastava, fund manager, Sharekhan. Usually, many market tops are made when the ratio of stock futures OI is between two or three times that of index futures OI. This time too it seems Nifty could have hit its top for some time. The chart gives an interesting trend."
