12 November 2011


November series has been extremely tough for traders, especially for momentum traders who try to follow a trend, play break out and rely on a fast moving market. If you are caught wrong footed on a position or just confused as to what side to take, well welcome to the party.

The prime reason for this extraordinary environment is the increased focus of market and more so the media on news coming out of Europe. None of us know how long this will carry on, but it surely has become a joke to some extent. Things will sooner than later come to a break point when market will decidedly act.

I am trying to see how the Institutional Investor are playing this Market.

The chart below shows FII Index futures and equity action of FII as well as DII. The upper panel shows Long and Short position build up for each day and cumulative as well. The lower shows how much FII and DII have bought or sold in equities.

As seen from the chart FIIs added a whole lot of Longs and got rid of their Shorts on expiry day 25th Oct when Nifty rose by 94 points. They also bought decently in equities, though the DIIs sold it to them. So at this point of time we can expect FIIs are the ones who are bullish and DIIs bearish.

Focus on 28th Oct, when Nifty did a huge gap up and closed 159 points up. FIIs added more longs and got rid of shorts again. They also did a tremendous amount of equity buying, much more than DIIs supplied them. Funny thing to note: that level of Nifty has not been reached again.

The FIIs have since then (till 4th Nov) did nothing significant, except for reducing the longs. And on 8th and 9th Nov bought equity and increased longs, DIIs meanwhile are doing their selling.

Now come to what happened on 11th Nov, when Nifty closed on 5170, over 200 points below the Intermediate top. FIIs are suddenly cutting their Longs significantly and what more there are signs of Short addition. There is not much equity action, but its generally seen that equity action by FIIs lag their derivative action.

So are the FIIs finally given up on their bullish stance? Or this action on Friday just a one day panic. We will get clues for this in the coming week. To make things interesting US markets have rallied strongly on another set of news coming from Europe!

If we see FIIs shifting to bullish mood again next week, we can expect 5400 to be taken out in near future. But if we see the rally in global markets being ignored and sold into by the FIIs, there is a huge chance of this  being another bad series for Nifty. Note how DIIs have not at all shown interest in buying, which shows they are expecting lower levels again. My friends at Vtrender also point out how DIIs sell at market tops.

One thing is for sure DIIs are more sure about what they want to do in this market! FIIs were bullish, but looks like they may change their opinion. Whatever happens, one thing is for sure, these are extremely confusing times and everything depends on how the news flows, which is never a good time to be in the Market.


Vtrender said...


Very well put through in charts. Pictures do speak a thousand words!!

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