By Ashwin Ramani, Derivatives Analyst at SAMCO Securities
Nifty rose by 3.63 percent during the July expiry. Nifty futures rollover stood at 83.95 percent, which is significantly higher compared to last month's expiry rollover of 76.06 percent and its three and six months average of 77.34 percent & 73.85 percent, respectively.
Nifty will start the August series with an open interest (OI) of 1.33 crore shares compared to an OI of 99.52 lakh shares at the beginning of the July series. Nifty saw significantly higher rollover with a higher cost of carry (+0.93 percent) and a rise in open interest, compared to its previous month, indicating carry forward of long positions to the August Expiry.
India VIX, known as the fear indicator, fell 3.44 percent during the July month series, decreasing from 10.89 to 10.51 levels, giving some comfort to the bulls. The FII Long Short ratio rose from 66.42 percent to a high of 73.04 percent on July 6, before closing at 58.58 percent on July 27 during the July series expiry. The Put-Call Ratio, a sentiment indicator, however, fell from 1.40 to 0.60, indicating strong Call writers’ strength.
On the Options front in the August monthly expiry, the 19,600 Strike Put option has the highest open interest with 1.02 crore contracts followed by the 19,500 strike Put option with 74.22 lakh contracts. While on the Call side, the 19,700 Call has the highest open interest with 1.12 crore contracts followed by the 19,800 Call strike with 99.11 lakh contracts.
Nifty made an all-time high of 19,992 on July 20 and has fallen 1.66 percent until July 27. The index is consolidating around the 1.414 Fibonacci Extension of 19,754 since the last four trading sessions, drawn from the high of 18,888 made on December 1, 2022, to the low of 16,828 made on March 20, 2023.
Nifty has formed a Bearish Engulfing candlestick pattern on the daily charts, which is considered to be a bearish reversal signal. Minor corrections can’t be ruled out at this point. The underlying trend still remains positive and Nifty is expected to find support around the 19,500 zone which also coincides with the 20-day exponential moving average (DEMA).
The foreign portfolio investors (FPIs) Long-Short Ratio, which stands at 58.58 percent, indicate that the FPIs hold more long positions than the short positions in Index futures. However, profit booking of long positions has been observed in the last four trading sessions, because of which the markets remained under pressure.
As we step into the August series Expiry, option activity at the 19,800 strike will set the tone for future Nifty direction. Nifty needs to give a strong close above 19,800 for the uptrend to resume.
Bank Nifty has been consolidating in the 45,600-46,200 range since the last six trading sessions. The downside support for Bank Nifty is placed around 45,300 zones while a close above 46,200 will drive further rally.
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