Strong rollovers hold further uptick in markets

Futures & Options (F&O) data points to a possibility of surpassing 11,750 level for Nifty in the September derivatives series. However, key indices may weaken in September F&O series after recording gains in the previous three series in a row.

Continuing the upward momentum from July, Nifty further rose in the August series as well. The Nifty rollover to September derivatives series was 79.92 per cent as against 77.59 per cent in August series, and three-month average of 74.76 per cent. Bank Nifty rollover was 77.91 per cent from previous 75.30 per cent. The overall market-wide rollover to September series was 88.92 per cent from 87.85 per cent, according to data from sharekhan.com.

With marginal short positions seen in the market, it may be a brief pause for the indices. Since the RBI decided to end the moratorium option in August, the banking stocks may gain momentum propelling Bank Nifty further high, observe derivatives analysts. The 12,000 strike, which also witnessed maximum Call OI addition of 9.39 lakh contracts, recorded highest Call OI of 24.88 lakh contracts followed by 11,800 strike with 17.90 lakh contracts, 11900 strike with 16.22 lah contracts and 11,700 strike with 16.16 lakh contracts. Further, 11,900/11750/11950 strikes recorded significant Call OI buildup.

Coming to Put side, 11500 strike witnessed highest Put OI of 28.32 lakh contracts followed by 11,600 strike with 22.53 lakh contracts, 11400 strike with 18.58 lakh contracts, 11000 strike with 18.56 lakh contracts and 10,500 strike with 17.39 lakh contracts. Maximum Put OI buildup of 13.01 lakh contracts is seen at 11,600 strike. Further, 11500/10800/11000 strikes recorded reasonable Put OI buildup. Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said "From derivatives front, Call writers at 11,500 strike triggered short covering, which took the Nifty towards 11,650 level."

For the August F&O series, Nifty rose 4.2 per cent and Bank Nifty gained 9.3 per cent. Nifty is moving towards its first conservative level of 11,696 points. "Highest rollover is seen in GodrejCP, PageInd and ACC whereas lowest rollover seen in AshokLey, PNB and VEDL. Traders' interest was seen in banking and Open Interest addition witnessed in PNB, Canbk, BankBaroda. On the other side, liquidation seen in the auto sector and on top are Escorts, TVS Motor and Tata Motor," remarked Bisht. Among sectoral indices, Nifty Media, Nifty metal, Nifty Realty and Nifty Auto recorded double-digit gains in the range of 12.2-26.56 per cent. "Once again Indian markets continued positive momentum last week with Bank Nifty out performance as bulls kept control over the markets with support coming from leading names like Kotak Bank, SBI, ICICI Bank and Axis Bank," observes Bisht. For the week ended August 28, 2020, BSE Sensex closed at 39,467.31, a net gain of 1,032.59 points or 2.68 per cent. Similarly, NSE Nifty too gained by 276 points or 2.42 per cent, and closed the week at 11,647.60 points.

"As far Nifty is concerned, 11600 and 11500 levels would act as strong support and bias is likely to remain bullish in the coming week as well," forecasts Bisht. Put-Call Ratio (PCR) was 1.64 at the beginning of the September series. Volatility index declined to 18 per cent, which is five-month low. "The Implied Volatility of Calls closed at 16.87 per cent, while that for Put options closed at 18.34 per cent. The Nifty VIX for the week closed at 18.90 per cent and is expected to remain volatile. PCR OI for the week closed at 1.52 slightly down as compared to last week at 1.60, which indicates more Call writing on upper strikes. It points towards more upside in coming sessions with support placed at 24,000 to 23,800 zones," remarked Bisht.

Nifty futures commenced the September series with 1.22 crore shares worth Rs1.27 lakh crore as against 1.12 crore shares valuing Rs1.15 lakh crore in the previous series. Long buildup is seen in Nifty. The sharekhan.com data further reveals that the rollover cost was 20 points and it points to carry forward of long positions. Nifty futures rollover and Bank Nifty rollover were above 75 per cent each into the September series. This is due to sufficient liquidity-driven trading, added analysts. Auto sector and cement sectors witnessed the highest rollovers of over 80 per cent.

Bank Nifty

Recovering by 2,224.2 or 9.97 per cent for the week, Bank Nifty closed at 24,523.80 points as against the previous week's closing of 22,299.60 points. "From technical front, Bank Nifty has managed to give a sharp breakout above its 200 days exponential moving average on daily charts and also manage to close above that," said Bisht. Bank Nifty moved above three upper levels based on volatility and this is indicating that bulls are holding firm, said the analyst. With good buying support being extended to Bank Nifty, the ratio of BN-Nifty is changed to 2.07 from 1.92 level.