Narrow positive bias amid unwinding of Puts

June derivatives expiry began on a volatile note and the rollover for Nifty and Bank Nifty was 71.5 per cent and 82.75 per cent respectively. Long unwinding was seen in both the indices. On the expiry day of May F&O series, short covering was seen in Nifty.

The derivatives May series was concluded at the highest levels of the month amid high rollover of positions in several key sectors. The impact of poll results influenced derivatives contracts in a more positive manner, while the mid-cap space has relatively outperformed.

The rollover into the June series was seen above average of 67 per cent. The June series for Nifty began with 18.8 million shares, while the roll spread declined to 33 points from almost 80 points seen in the last series largely on account of expected dividend of 26 points.

The 12,000 strike has highest Call Open Interest (OI) of over 21 lakh contracts followed by 12,100 strike and 12,200 strikes. Coming to Put side, 11,000 strike has highest OI of 14.82 lakh contracts followed by 11,800 strike and 11,900 strike.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Nifty was dragged down due to liquidation of long positions and profit booking. Recent data has turned slightly cautious and is indicating probability of further profit booking.

We have seen Call writing and Put unwinding in recent trading session. Call writers were active at 12,000, 12,100 strike Calls indicating limited upside. The levels of 12,000 will remain crucial for this week as indicated by option Open Interest concentration.

The options Open Interest concentration is at the 12,000-strike Calls (current week and monthly expiry) with the highest Open Interest of above 35 lakh shares. Among Put options, the 11,800-strike (current week and monthly expiry) taking the total Open Interest to 24 lakh shares, with the highest Open Interest among Put options."

Majority of the index heavyweights witnessed significant Call writing near ATM (at the money) strikes, due to which derivatives analysts expect that there would be limited upsides in the index in the near term.

The Nifty recorded significant writing at ATM Call of 12,000 strike for the coming weekly settlement. India volatility index (VIX) was up 2.9 per cent to 16.06 per cent. This is suggesting short-term stability in the market, observe derivatives analysts.

"The Implied Volatility of Nifty Calls closed at 13.68 per cent, while that for Put options closed at 13 per cent. The Nifty VIX for the week closed at 15.61 per cent and is expected to remain volatile. The PCR OI for the week closed at 1.56, which indicates Put writing. Next support is placed around 11,800-11,750 levels," adds Bisht.

Nifty futures eased 0.46 per cent to 11,921 mark as long positions built up was seen in select stocks.

"In stock futures, we have witnessed highest rollover in ExideInd, MGL, WockPharma, CenturyTex and Glenmark, while lowest rollover seen in TataGlobal, GAIL, DCB Bank, IndusInd and Coal India. Sector-specific higher side rollover has been seen in chemicals and tyres, while refineries and gas distribution sectors observed least rollovers," maintained Bisht.

For the week ended May 31, 2019, BSE Sensex registered a gain of 279.48 points or 0.70 per cent and closed at 39,714.20 points as against 39,434.72 points on May 24. Similarly, NSE Nifty closed at 11,922.80 points, a marginal rise of 78.7 points or 0.66 per cent, from the previous close of 11,844.10 points.

Elaborating technicals, Bisht forecasts: "If Nifty falls below the 11,800 mark, it could correct to 11,700 levels on the back of further profit booking. On bounce, the index will face strong resistance at 11,950-12,000 levels."

Bank Nifty

Bank Nifty closed the week at 31,375.40 points, rise of 162.85 points or 0.52 per cent as against the previous week's 31,212.55 points.

According to ICICI Direct.com, additions were seen in 32,000 Call during the past two weeks, whereas sizeable additions were seen in 30,500 Put, which is also the low and support level of the last week.

Derivatives analysts expect that the once the index rises over its sizeable Call base of 32,000 short covering can be seen whereas if profit booking extends then the 30,500 should act as a cushion.

The Bank Nifty witnessed consolidation near all-time high levels. However, the banking index closed the May expiry at a new high. The volatility remained very high on the last day of the week where it fell from 31,800 to 30,600 intraday.

The June expiry for Bank Nifty has begun with relatively high Open Interest compared to the last four months whereas the rollover spread declined significantly from 204 in May to 65 in June primarily due to dividend of almost 70 points.

However, fresh short additions cannot be ruled out near life-time high levels in the June series.