India’s equity indices experienced a drop of over 1% on Wednesday, with traders cutting a portion of their bullish bets ahead of a US inflation reading on Thursday that is seen as influential in determining the Federal Reserve’s interest rate cut timing. The Nifty fell 1.11%, or 247.2 points, to close at 21,951, while BSE’s Sensex declined 1.08%, or 790.3 points, to close at 72,304. The Nifty Midcap 150 and Nifty Smallcap 250 indices also saw decreases of 1.8% and 1.9%, respectively. Some analysts point to the record high open interest in index and futures as the main driving force behind the fall. This is the third time that the open interest relative to the index has surpassed 18 times, following previous instances in 2008 and 2018. Rohit Srivastava, founder of indiacharts.com, stated that “the open interest in F&O is at record high levels indicating significantly long exposure.” He also noted that profit booking took place at these levels, as not everyone chose to roll over their positions. As futures and options contracts for the February series are set to expire, traders have been liquidating their positions and refraining from rolling them over to the March series due to uncertainty in market prospects. Foreign portfolio investors (FPIs) net sold shares worth ₹1,879.23 crore, while their domestic counterparts were buyers to the tune of ₹1,827.45 crore on Wednesday. Srivastava predicts that the Nifty will fall to 21,000 levels in the near term, while Pankaj Pandey, head of research at ICICI Securities, expects the market to consolidate at higher levels and reach 22,700 by the end of the month.