Derivatives Outlook : 81% May series rollover points to 12k mark for Nifty

Long positions have been carried forward into the May series. NSE Nifty began the May futures and options (F&O) series with 81.39 per cent rollover, which is higher than the last three-month average of 62.94 per cent.

The derivatives segment witnessed a good volume of long positions during April F&O series as the Nifty reached its all-time high at 11,856 points.

During April series, Nifty rose marginally by 0.60 per cent, when compared with March series.

The Open Interest (OI) during April series rose over 10 per cent on expiry-to-expiry basis.

The profit booking had resulted in three per cent correction in the April F&O series. Foreign portfolio investors (FPIs) bought Rs12,419 crore in April series.

"We have seen long rollover to May series. Average rollover price is in the range of 11,700 to 11,750. Smart recovery was seen led by short covering from lower levels.

Calls writers covered their short positions and Put writers were actively selling puts. In stock futures, we see highest rollover in MRPL, CenturyTex, UBL, TataComm and ChennPetro and Star, while lowest rollover seen in CoalIndia, GFIN, ONGC, DLF and YesBank.

Maximum Put Open Interest in current week and monthly expiries buildup of more than 32 lakh shares is at 11,700 Puts, which should act as strong support zone," Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd.

After an encouraging rally in March F&O series, Nifty touched its new peak during April series. The 11,800 strike continues to be highest Call OI followed by 11,700 and 11,900 strikes.

On Put side, 11,700 has highest OI followed by 11,600 and 11,500 strikes.

"Among Nifty Call options, the 11,800-strike Call has the highest Open Interest of more than 26 lakh shares in current week and monthly expiries.

The PCR OI for the week closed up at 1.28, which indicates OTM Put writing. On the technical front 11,600-11,620 spot levels is strong support zone and current trend is likely to continue towards 11,800-11,850 levels," observes Bisht.

The option band is hovering in the range of 11,500 and 12,200 level. Nifty futures ended at 11,808 with minute gain of 0.66 per cent on long build up positions mostly in ICIC Bank, Tat Steel, KotkMahindr Bank and SRF.

NSE Nifty closed the week at 11,754.65 points, almost at the previous close of 11,752.80 points.

Registering a marginal gain of 72.95 points, BSE Sensex finished the week at 39,067.33 from 39,140.28 points in the previous week.

"Next week is most likely to trade in the range of 11,700 to 11,800 with positive bias. Nifty has multiple strong supports at lower levels. Various supports are 11,700 and 11,650 spot levels.

Option Put writers were active in recent rally. We have seen Put writing at 11,600, 11,700 Puts."

The high implied Volatility (IV) may continue till the election result day i.e. May 23. If BJP wins, the market is expected to gallop beyond 12,000 mark.

For May series end, the highest Call OI is at 12,000 strike, while highest Put OI is at 11,000 strike.

"The Implied Volatility of Calls closed at 21.32 per cent, while that for Put options closed at 22 per cent. The Nifty VIX for the week closed at 23.23 per cent and is expected to remain up trending," added Bisht.

Bank Nifty

Bank Nifty recorded buying interest pushing the index upwards. Registering a net gain of 209.9 points or 0.69 per cent, Bank Nifty ended the week at 30,013.50 points from previous close of 30,223.40 points.

The option band is hovering in the range of 11,500 and 12,200 level.

Nifty futures ended at 11,808 with minute gain of 0.66 per cent on long build up positions mostly in ICIC Bank, Tat Steel, KotkMahindr Bank and SRF.

For May series, support and resistance levels for Bank Nifty are at 28,600-28,000 level and 30,600-30,700 zone respectively.