As keen followers of Auction Market Theory and Volume at Price, we are keenly interested to know the kind of volumes which move the market.
Since the start of this year RM who gives us the daily McClellan readings has devoted a lot of time and energy to trace the footprints of one particular section of traders popularly known as Foreign Institutional Investors or FII's in our markets.
The helpful data from the NSE now ensures that we do get daily reports more on the likes of the Commitment of traders ( COT) report popular worldwide.
We track this data for a few reasons
a) It helps us ( as Viren says) keep an eye on the neighborhood
b) It shows us what the larger institutional desks are doing everyday.
c) This part of the market is very transparent and represents often times over 50% of the traded daily volume.
Here is a chart which was made by RM 2 days back on the Open Interest in futures and the FII role in them.
The chart is annotated and FII index Future longs and shorts can be compared with the total open interest of the market.
One thing which stands out is that every big upmove has happened with a fall in the red line or the shorts held by FII's.Most rallies have happened this year on short covering than active buying at the lows. The actual buying has come much later as the green lines would show.
A few days back I had covered in a post the September buying at 5700. That post is here : http://vtrender.com/content/vwap-September-revisited
When the Market hit 5700 the first time on 4th September , the total Open Interest in the Market in Nifty Futures was about 5L contracts and FII's held about 38% of the longs in the market that day.
Today when the market is at 6100, the total open Interest in the market is roughly the same around 5.2 L contracts , but FII's have increased their ownership in long positions from 38% to an astounding 76 % as of yesterday's close.
That 76% figure would alert us to the possibility of some profit booking and hence we would be checking the daily stats to see if there are signs of some profits taken after every fall.
On Tuesday though, they added 28620 long contracts in futures and showed no signs of taking profits off the table.
Watch this space for updates.