Rollover of short positions depicts tepid show
Put-Call ratio at 1.25 indicates OTM Put writing; India VIX index up 30%
Hyderabad: For a third consecutive monthly derivatives series, Nifty concluded August F&O series with a net fall of 2.7 per cent and Bank Nifty was down six per cent. Derivatives traders preferred to rollover their short positions into September F&O series amid Indian economy slowdown.
Nifty rollover of 68 per cent from August series to September series is lower than the three-month average of 76 per cent. Rollover of Bank Nifty is 66 per cent.
Nifty rollover into September series is with OI volume of 1.8 crore shares as against 73.7 per cent roll over with OI of 1.79 crore shares in August series.
With short side aggression going high, the roll cost fell to 37 bps from 55 bps. Nifty options data is pointing to wider range of trading for the week ahead (September 2-6).
Open Interest (OI) is spread in the range of 10,800-11,000 on Put side and 11,200-11,500 on Call side. This is confirming the gyrating band in this range. Drop in rollover and high short positions are indicating the weak sentiment in the market, observe derivatives analysts.
Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities, said: "Indian markets begin September series on a positive note with Nifty once again reclaiming 11,000 levels.
Sharp recovery was seen from lower levels with HDFC twins, ITC and ICICIBANK emerged as top contributors. From derivative front, Put writers were seen active in 10,900 and 11,000 strikes, while marginal Call writing was observed at 11,100 Call strike."
The market benchmark index BSE Sensex closed the week at 37,332.79 points, a net gain of 631.63 points or 1.72 per cent, from previous week's close of 36,701.16 points. Registering a recovery of 193.90 points or 1.79 per cent, NSE Nifty ended at 11,023.25 points as against 10,829.35 points.
Nifty corrected about 12 per cent to 10,637 points during the past three months.
Bisht forecasts: "From technical front, 10,900-10,850 zone should act as key support for Nifty, while on higher side 11,150 should be key resistance.
For coming week, we expect that as far we are holding in broader range of 10,850-11,150. However, on higher side anytime closing above 11,150 should trigger fresh short covering, which could move index towards 11,250 levels as well."
Indicating the rising market volatility, India VIX index rose 30 per cent during August series.
"The Implied Volatility of Calls was up and closed at 15.37 per cent, while that for Put options closed at 16.32 per cent. The Nifty VIX for the week closed at 16.43 per cent and is expected to remain volatile.
The volatility is likely to grip the market and some more wild moves are expected in coming sessions. PCR for the week closed at 1.25, which indicates OTM Put writing," remarked Bisht.
Analysts forecast that the Nifty may consolidate in next few months as the index has picked up some strength since the central government has come out with some initiatives to boost the economy. However, the rollover of short positions is likely to put pressure at higher levels.
NSE banking index Bank Nifty gained 469.2 points or 1.74 per cent and closed at 27,427.85 points from the previous close of 26,958.65 points. Bank Nifty recorded offloading of long positions as F&O traders preferred building short positions.
According to ICICI Direct.com, the Bank Nifty witnessed short covering from 26,550 and rallied towards 28,000 for the week. However, it lacked pace as buying interest could not pick up above 28,000 level.
This resulted in reversal, which triggered selling in most banks. The data at ICICI Direct.com reveals that the current price ratio of Bank Nifty-Nifty fell towards its February low of 2.48 on the back of selling in private banks.
The underperformance in banking stocks vis-à-vis Nifty is likely to continue and the ratio could face hurdle near 2.52 levels.