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F&O rollovers hint at bullish mood, FIIs cut bearish bets

Besides Karnataka elections, rupee movement will also direct market in the May series.

, ET Bureau|
Updated: Apr 27, 2018, 08.37 AM IST
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The Sensex gained 5.3 per cent during the series, while the Nifty gained 5 per cent.
The rebound in the market in the last one month has prompted traders to carry forward bullish positions to the May derivatives series as the April contracts expired on Thursday. Expectations of BJP’s performance in the upcoming Karnataka state elections will determine whether these bets will stay, said analysts. The highest rollover of bullish bets was seen in technology futures contracts following the weakening of the rupee against the dollar.

The Sensex gained 5.3 per cent during the series, while the Nifty gained 5 per cent. The Nifty IT index was the top sectoral index gainer with a rise of 9.5 per cent. Public sector banks saw more of short positions carried forward.

Buying in the last hour of trade helped indices end firmly in the green on Thursday. The Nifty ended up 47.25 points, or 0.45 per cent, at 10,617.80 and the Sensex ended up 212.33 points, or 0.62 per cent, at 34,713.60.

Market-wide rollovers stood at 83 per cent, higher than the average rollovers of 79 per cent in the last three series. Open interest stood at Rs 1.53 lakh crore compared to Rs 1.35 lakh crore on the previous expiry day. Nifty futures rollover stood at 72 per cent versus average rollovers of 66 per cent in the last three series. Open interest in the Nifty futures stood at Rs 24,500 crore, higher than Rs 21,200 crore on the previous expiry day.

Rollover snip

“The surge in volatility usually seen ahead of elections is not there. The market has absorbed negative news from the global side and put writings at 10,300 and 10,500 show downside is expected to be limited. If this set-up continues, then it would mean that the market is preparing for some positive surprise,” said Amit Gupta, head of derivatives at ICICIdirect.

Besides the Karnataka elections, the rupee movement will also direct the market in the May series.

“The level of 67.5 is crucial for USD-INR. It is approaching that resistance level and if that is taken out, then we may see outflows from the equity market,” said Gupta.

Navneet Daga, head of derivatives at IIFL Wealth, said volatility this time may be low compared to previous state elections as the bias is on the long side.

Analysts said the recent bounce after almost two months of turmoil starting February has boosted sentiment. The Nifty has risen 6.7 per cent from the low of 9,951.90 which was hit on March 23.

The market ignored global negative news surrounding Syria, trade war and oil prices to end higher in the April series. Analysts said the sharp fall in the market between February and March was utilised by traders to buy at relatively attractive levels.

Bullish Rollovers
Foreign investors, too, have cut their bearish bets and added bullish ones. “The FII long-short ratio has risen to 54.3 per cent from 18 per cent as they have covered their short positions and added long positions,” said Sneha Seth, derivative analyst at Angel Broking.

In the May series, the 11,000 call option holds the highest open interest among calls followed by the 10,800 call option. Among puts, the 10,500 strike held the maximum open interest followed by the 10,400 strike.

“What is interesting is that 11,000 call option (for Nifty) added 17 lakh shares on Thursday,” said Daga.

Analysts said 10,400-10,800 will be the immediate range of the Nifty.

“Option data suggest an immediate trading range in between 10,500 to 10,700 and a decisive breakout on either side would give further movement in the market,” said Chandan Taparia, derivative analyst at Motilal Oswal.

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