Upswing likely amid rollover of long positions

The highest Open Interest (OI) addition of over 10 lakh contracts and about 5.5 lakh contracts at 11,600 strike and 12,000 strike respectively suggest shifting of resistance levels to higher strikes. This would give more space for Nifty to trade higher.

The highest Call OI of 20.67 lakh contracts is seen at 11,600 strike followed by 11,700 and 12,000 strikes. The futures and options (F&O) traders carried forward their bullish positions into October derivatives series.

The F&O data points to 12,000 level for NSE Nifty in the week ahead (September 30- October 4). Long positions have been aggressively carried forward into October derivatives series.

However, about 30 per cent short positions have also been carried forward amid continued global worries. On the Put side, 11,500 strike has maximum OI of 12.31 lakh contracts followed by 11,000 strike and 11,400 strikes. Corporate earnings season will influence trading pattern in October derivatives series.

"After ending the September series with smart gains, Indian markets begin October series on a muted note. However, Nifty managed to hold above 11,500 levels as Call writers were seen active at 11,600 strike with marginal OI addition at 11,500 Put strike.

For coming week, we believe that some consolidation may continue in index and we may witness stock specific moves," said Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities.

Nifty rollover into October derivatives series was 73.1 per cent, below the three-month average of 74.28 per cent, as against 68 per cent into September series. The rollover cost for September expiry was at 60-65 basis points (bsp) as against 38-40 bsp in August expiry.

Nifty added 5.7 per cent and Bank Nifty gained 9.9 per cent during the September series from 10,637 August low. The September series also halted the three-month losing streak thanks to the cut in corporate tax and other stimulus packages announced by the Centre.

The Nifty futures rollover OI was 1.55 crore shares as against the level of about 1.8 crore shares in the previous rollovers into July and September.

Majority of option writers burnt their fingers after the announcement by the Centre on last Friday and Monday.

For the week ended September 28, 2019, BSE Sensex registered a net gain of 807.95 points or 2.12 per cent and closed at 38,822.57 points from previous week's close of 38,014.62 points.

Similarly, the NSE Nifty closed the week at 11,512.40 points, a rise of 238.20 points or 2.11 per cent, as against 11,274.20 points.

"On the technical front, the NSE Nifty is taking a breather at current levels after a stunner run from 10,850 to 11,650 levels.

The overall structure is positive for the markets as the Nifty is holding above 11,400 level. Put-Call ratio of OI for the week closed at 0.98.

However, on higher side anytime break above 11,600 (spot) level, Nifty will add further follow up buying," forecasts Bisht. According to the data on ICICI Direct.com, the Nifty consolidated near 11,500 after witnessing an up move of almost 1,000 points of in two sessions.

The September expiry recorded the Nifty closing above the newly formed highest Put base of 11,500 strike.

"However, some volatility may remain on cards tracking mixed global cues. The Implied Volatility of Calls was up and closed at 14.86 per cent, while that for Put options closed at 15.65 per cent.

The Nifty VIX for the week closed at 16.34 per cent and is expected to remain volatile," added Bisht. The noticeable Put base after 11,500 is placed only at 11,000, as per ICICI Direct.com data.

Put writers are skeptical of writing closer strikes other than 11,500. The noticeable Call base is also placed at 11,500, which means the Nifty may enter into short-term consolidation with immediate support at 11,400.

Hence, short strangles can be done for the coming weekly expiry considering the holiday on October 2.

Bank Nifty

Gaining by 895.1 points or three per cent, the Bank Nifty ended the week at 29,876.65 points as against 28,981.55 points.

Bank Nifty rollover into October series was 57.6 per cent and OI of 0.09 crore shares as against 66.4 per cent rollover into September series with OI of 0.15 crore shares.

The rollover pattern indicates short covering in the Bank Nifty, observe derivatives analysts. The rollover cost rose to 0.76 per cent from 0.49 per cent on increased buying volumes into October series.

The September series of Bank Nifty concluded on an optimistic note and above its previous hurdle of 29,500 strike. According to ICICI Direct.com data, the Bank Nifty began the October series with lower OI base of only 0.88 million shares, an eight-year low at the start of any expiry.

Short positions, which were formed in the September series, were left uncovered whereas Call writers covered their positions on the last day of the expiry.