Bulls are reluctant to give up and as a result, Nifty50 touched a record high of the 14,000 mark. The last series of 2020 started with long positions in the system and the Bulls kept on adding fresh longs.
The uptrend is so strong that most of the intraday dips were getting bought quickly. Barring a sharp sell-off on 21 December, we haven’t noticed the existence of Bears in this market.
Despite the massive single-day fall of more than 400 points, bulls were not willing to surrender, and thus, we witnessed a V-shape recovery after that.
The index marched above the 14,000 mark for the first time in history and managed to conclude that the December expiry a tad below the same. It gained 7.66 percent over its November series close and formed a Big Bullish candle on the monthly chart.
Buying interest was seen across the board as all the sectoral indices ended the series in green. Among them, Realty, PSU Banking, Metal, IT, and Pharma indices were major gainers.
We witnessed a good amount of long build-up in the recent rally of Nifty and some of these positions got rolled to the next series as open interest has increased by 5.63 percent on a series-on-series basis.
Rollover stood at 75.94 percent, which is in-line with its quarterly average of 75.59 percent. The overall data indicate that the longs are still in the system and some more steam left on the upside.
India VIX increased by 5.37 percent to 21 levels in the December series. Volatility needs to cool down below 20-19 zones to support the bullish market setup with a higher market base.
The rally is supported by relentless buying from FIIs desk. FIIs continued their buying streak and cumulatively bought more than 55,937 crores worth of equities in the December series.
The continuous buying, barring one negative day, has supported the index at higher zones. FIIs index futures positions remained majorly unchanged as their ‘Long Short Ratio’ has marginally changed from 76.63% to 75.64% on a series-on-series basis.
On the other hand, DIIs have been selling non-stop and cumulatively sold equities to the tune of Rs 42,262 crores in the December series.
On the options front, maximum Put OI is placed at 13,000 followed by 13,500 strikes while maximum Call OI is placed at 14,000 followed by 14,500 strikes. Options data suggests a wider trading range in between 13,500 to 14,500 zones.
One of the most eventful years (2020) ended with gains of around 15%, posted 5th year of consecutive gains. After hitting two lower circuits in the month of March, we witnessed a tremendous comeback from the Bulls and the record-breaking Bull Run continued in the later half of 2020.
Market bid adieu to the decade at a high note as Nifty closed at a record high of 13982.
At the current juncture, the market is in bulls' grip and dips are getting bought into quickly. The Nifty’s derivatives data is also positive and indicating a continuation in ongoing momentum.
The Nifty is trading at an all-time high and it seems there’s no limit on the upside for the bulls. However, FIIs index futures data signifies they are overbought in the Indian market and any unwinding of longs or fresh shorting may lead to a correction in the market.
Thus, some cautious approach should be adopted at these levels. But, one shouldn’t pre-empt ‘tops’ in this Bull run and rather stay with the ongoing trend until it reverses.
This is a ‘Buy on Dips’ market and traders should look for buying opportunities on dips till the time we don’t see any strong signs of reversal on charts or derivatives data. As far as levels are a concern, the index is moving in uncharted territory and 14,500 would a hurdle as per options data.
On the flipside, immediate support exists at 13,777 then 13,500 zones.
The Bank Nifty relatively underperformed the benchmark indices as it moved up by 5.80% in the December series. We witnessed the formation of narrow-ranged candles on most trading sessions of the series.
However, a bullish candle is formed on a monthly scale. We witnessed some long build-up in the banking index. But most of the positions formed in the December series are now out of the system as open interest remained flattish on a series-on-series basis.
The rollover in the banking index stood at 78.13 percent, which is slightly higher than its quarterly average of 77.33 percent. At the current juncture, some longs are intact in the system and Bank Nifty is not long heavy, which provides further room for upside momentum.
As far as levels are concerned, crucial support for the banking index is placed at the 30,500 and 29,000 zone. On the flipside, immediate resistance can be seen around 32,600 and then 33,500 zone.
Since we witnessed broad-based buying in December, too many stocks witnessed long build-up. Some stocks which had significant long rollovers are Canara Bank, SAIL, Tata Chem, IGL, Asian Paint, GAIL, ONGC, Sun TV, Cadila Healthcare, National Aluminium, etc. While very few stocks like Escorts, Ramco Cement, Ambuja Cement, and ACC had short rollover.
Note: This note is just an interpretation of derivative data and not trading advise.
(Jay Purohit, technical and derivatives analyst, Motilal Oswal Financial Services)
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