Keeping a watch over the trading activities of very large market participants have always been a favorite activity of traders. Indian stock exchanges, as far as we know, do not release a COT’s report (Commitment of Trader’s report). The nearest equivalent one can think of, is Participantwise report released by National Stock Exchange every day. NSE report categorizes all participants in four groups, FII, DII, Pro and Clients.
- FII – Foreign Institutional Investors
- DII – Domestic Institutional Investors
- Pro – Proprietary traders (brokers trading on their own account)
- Clients (Traders who don’t fall in the first three categories!)
Curiously the correlation is just the reverse with FII’s Stocks Futures positions which makes it obvious that Stock Futures positions are a hedge for their cash holdings.
Coming to Index Options the correlation almost breaks down with Index PE positions.
Index CE positions move a bit more in tandem with Nifty Futures but expiry and rollovers make the journey quite rough!
Overall while a distinct correlation exists between Nifty and FII positions in the longer term, it is not always discernible on a day-to-day basis.