Is Tata Motors slide telling us more about markets?
Over the last two days, Tata Motors ended up being the whipping boy of the market. On Tuesday, the stock tanked 10 percent intraday but closed with a cut of around 8 percent. CNBC-TV18s Prashant Nair uses Tata Motors as a pivot to see if the overall market has gotten a little ahead of itself in terms of exuberance, positioning, and complacency. Usually, when a well-owned stock sees a sharp correction, volumes pick up. For Tata Motors, on Tuesday, the volumes (shares) traded were 16 crore versus an average of 6 crore, and around 4 crore shares were marked for delivery as against 50 lakh shares on an average. Futures open interest also went up 15 percent on Tuesday. The cumulative open interest the day before yesterdays close was 9.1 crore shares, while the cumulative open interest average (Mar + April +May) was 10.2 crore shares. The cumulative open interest average high stands at 11.8 crore shares and low at 8.85 crore shares. So, this shows positioning was not at the extreme. The FII net positioning on stock futures was six lakh long contracts in June. By mid-June, net position on stock futures was down to 10,000 short contracts. This is the first instance since 2018, when FIIs bet through stock futures in negative territory. While as of Tuesday, the net position of FIIs in stock futures is 9000 short contracts. For retail, the net position stands at 10 lakh long contracts, which is at a four-year high. Similar trend was seen in January 2018, with retail having huge exposure in stock futures. Lack of broader participation  If one were to look at the ratio of bottom 50 stocks in the NSE basket to the top 50 stocks, currently the ratio stands near its January 2018 high. Nifty implied volatility is currently at 13, the lowest since February 2020 fall. So, the IVs are very low relative to markets at all-time high. So, this means market is comfortable with where it is and does not foresee either a big upside or downside. Watch accompanying video of CNBC-TV18's Prashant Nair for more detail