F&O Tracker: Fresh shorts arrive in index futures

Nifty 50 (24,565) was down 1.1 per cent and Nifty Bank (55,618) lost 1.6 per cent last week. The futures and options (F&O) data show a bearish bias. Here is an analysis:

Nifty 50

Nifty futures (Aug) (24,627) dropped 1.3 per cent last week and at the same time, there was an increase in the Open Interest (OI). The OI rose from 74 lakh contracts on July 25 to 169 lakh contracts on August 1. This shows fresh short build-up.

In line with this, the Put Call Ratio (PCR) of weekly options stood at nearly 0.60 on Friday. A ratio less than 1 is because of a greater number of call option selling when compared to puts. Traders sell calls when they hold bearish expectations.

However, the chart shows that the underlying Nifty 50 index has a strong base at 24,500. The equivalent level for Nifty futures (Aug) is at 24,600.

In case the support at 24,600 holds well, Nifty futures can establish a rally, possibly moving up to 25,200 in the near term. Resistance above 25,200 is at 25,370.

On the other hand, if the contract breaches the base at 24,600, it can fall to 24,200 and 24,000, which are potential support levels.

Strategy: Since there is an important support ahead, traders can hold on to Nifty futures (Aug) long initiated at 24,700. Maintain the stop-loss at 24,500. When the contract touches 25,000, revise the stop-loss at 24,800. Book profits at 25,200.

That said, if Nifty futures slip below the support at 24,600 and triggers the stop-loss of the long position suggested earlier, it would be an indication of further decline. In that case, traders can short Nifty futures below 24,500 with a stop-loss at 24,800 for a target of 24,000.

Instead of shorting futures, one can consider buying a put option at the prevailing price when Nifty futures drops to 24,500. We suggest 24,500-put of August monthly expiry. Target and stop-loss can be based on the Nifty futures’ levels as aforementioned.

Nifty Bank

Nifty Bank futures (Aug) (55,794) depreciated 1.7 per cent over the last week. As this happened, the OI of this contract increased from about 6 lakh contracts to a little over 21 lakh contracts. This indicates short build-up.

Supporting the bearish tilt, the PCR of August expiry options stood at 0.9 on Friday. A ratio less than 1 is considered bearish as more call options have been sold compared to the puts.

The chart of Nifty Bank futures, too, hints that the bears are having an upper hand over the bulls.

Although there might be an uptick in price from the current level, possibly to 56,200 or 56,500, the contract is likely to resume the decline and drop to 55,500, a support. A breach of this can open the door for a decline to 54,500. 

On the other hand, if the bulls can lift Nifty Bank futures above 56,500, it could lead to a tough fight against the bears. But to establish a sustainable rally, the barrier at 57,000 should be decisively breached. 

Notable resistance levels above 57,000 are at 57,500 and 58,000.

Strategy: For a better-risk reward ratio, instead of shorting Nifty Bank futures (Aug) now, wait for it to rise to 56,200 and then sell. Place initial stop-loss at 56,600.

After initiating the trade, if the contract slips to 55,700, trail the stop-loss to 56,100. Book profits at 55,500.

Alternatively, one can consider buying the 56,000-put option if its premium moderates to ₹600. Target and stop-loss can be ₹1,200 and ₹350 respectively.

Published on August 2, 2025