FPI, retail outflows may extend stock market correction

livemint.com:

MUMBAI : Indian stocks extended their decline for a fifth straight session on sustained selling by foreign and retail direct investors amid rising bond yields in the US, the Israel-Hamas war, which is now threatening to engulf other countries, and rising crude prices. Market experts expect stocks to fall further. Benchmark indices Nifty and Sensex fell more than 0.8% each to 19,122.15 and 64,049.06 on Wednesday as foreigners offloaded shares worth a provisional ₹4,236.6 crore and continued selling by retail, offsetting the ₹3,569.36 crore worth of buying by domestic institutions.

The decline in the past five sessions has eroded investor wealth by ₹14.45 trillion. Apart from the cash market sales by foreign portfolio investors (FPIs) and retail direct investors, particularly those engaged in secondary market trading rather than systematic investment plan (SIP) investments through mutual funds, the huge selling of call options shows that investors and traders are bracing for a sharper correction. On a marketwide basis, net outstanding calls’ value exceeded that of puts by ₹4.87trillion as of 25 October, a record high.

Data for 25 October was not available until press time. That means option sellers have sold that many more calls than puts in the belief that the market could correct more, at least until Thursday’s monthly expiry of futures and options, according to Rohit Srivastava, founder of Strike Money Analytics & IndiaCharts. These include index and stock options.

A call option seller is bearish, while a put option seller is bullish. When the outstanding value of calls is more than puts, it’s a bearish indication. “Benchmarks like the Nifty and Sensex could correct by 2-3% more while the mid caps and small caps could