Top 7 stocks showing short covering sparks

In the last two weeks, the BSE Sensex has plummeted by more than 3400 points in six trading sessions, primarily due to rising US bond yields and concerns regarding the Israel-Hamas conflict. Several other factors have also contributed to this decline, including the escalation of US dollar rates, participatory selling, foreign institutional investors (FIIs) selling off, and mounting inflation concerns.

The continuous Israel-Hamas conflict has introduced significant uncertainty, leading to panic selling among investors. Second, the relentless rise in the 10-year US bond yields, which have surpassed 5%, has exerted pressure on global markets, including the Indian market. Third, the surge in the US dollar index to nearly 107 levels has alarmed global equity markets. Fourth, participatory selling has affected not only large-cap stocks but also broad market indices. Additionally, foreign institutional investors have continued to divest from Indian equities, and mounting concerns about rising crude oil prices, stemming from Middle East tensions, have raised inflation worries, particularly in an economy heavily reliant on oil imports.

With all these negative factors causing market declines, bearish traders saw an opportunity to make quick profits through derivatives. The bear cartel in the stock market was active during this downturn, creating short positions in certain stocks. Now, in the last two sessions, the markets have turned green, likely due to profit booking by bearish traders covering their short positions. After a short position is created in a security, it must be covered before expiry, leading to a short covering rally in the index or a specific stock.

To identify this short-covering rally, here are seven stocks that showed signs of short covering on Monday: [List the 7 stocks here]. The short covering can be recognized when a security’s price rises significantly while the open interest decreases, indicating that traders who had previously sold short are now buying to close their positions.

Here are 7 stocks which had a short covering on Monday: 

Tata Communication Ltd

Oberoi Realty Ltd

Bharat Heavy Electricals Ltd

Cipla Ltd

REC Limited

Indian Hotels Company Ltd

Mahanagar Gas Ltd

Disclaimer: This blog is intended solely for educational purposes. The mentioned securities are provided as examples and should not be considered recommendations. The information is based on various secondary sources on the internet and is subject to change. It is advisable to consult with an expert before making any related investment decisions.