Can Nifty sustain its mojo in July F&O series? Here's what rollovers say

Most brokerages expect the bullish momentum in the market to take the Nifty further high towards 19,300-19,500 in the July derivatives series, backed by the strong long rollovers of FIIs.

Bulls took over the market in the June derivatives series, pumping the Nifty to fresh highs on the day of the expiry. Continuing with the trend, bulls seem to have the upper hand in the July series as well, if one were to go by the rollover data.

According to data from Nuvama Alternative & Quantitative Research, traders rolled over 76 percent of the positions in Nifty futures to the July derivatives series, which is higher than the three-month average of 70 percent seen on the day of expiry.

The market-wide rollover was at 90 percent, on par with the three-month average of 90 percent. The rollover for stock futures was at 93 percent, slightly lower than the average of the last three series at 94 percent, the Nuvama report showed.

An interesting trend emerging from the rollover data is that foreign institutional investors (FIIs) appeared to be more bullish at the start of the July series as their net longs stood at 56,000 contracts compared to 19,000 seen at the beginning of the previous series, Viraj Vyas, technical and derivatives analyst at Ashika Stock Broking, said in a report.

"The net longs of domestic institutional investors, however, witnessed a slight decline to 49 percent against 53 percent in the previous series, as they continued to book profits and add index shorts during the June series," Vyas added.

Nonetheless, Motilal Oswal Financial Services believes that meaningful shorts have been covered and longs are being developed at any small dips, which have acted as a good base and may drive the fresh upmove.

Also Read: Rollovers help gauge carry forward of strength into next expiry: Shubham Agarwal

Meanwhile, Abhilash Pagaria of Nuvama Alternative & Quantitative Research shed light on the seasonality of the July series for the last 10 years for the Nifty as it tilted towards bullishness eight out of 10 times, with the index flushing out an average gain of 2.9 percent.

Continuing with the trend and aided by the strong bullishness among FIIs, Pagaria believes the momentum can lead markets higher till the Nifty 50 touches 19,300 with continued sectoral rotations.

MOFSL also holds a similar opinion. Considering the overall derivatives setup, the brokerage expects a positive direction for Nifty as the market moves into the July series. Religare Broking also takes account of the major long rollovers seen for the July futures, with an average price of around 18,800, a level that the firm believes will become a pivot for the month.

"Till the time Nifty 50 trades above 18,800, the resistance might only be near 19,300–19,500 levels. We expect the Nifty to find strong support at 18,800 levels for the July series," Religare Broking stated in its report.

On the sectoral level, Pagaria anticipates bullishness in information technology (IT) and metal counters while automobiles can witness some consolidation. "We believe the banking index can continue to be a laggard and be used for shorting with a strict stop loss at 44,980," he added.

Among specific counters, he expects companies like Power Finance Corporation of India (PFC), Polycab India, and IDFC First Bank to benefit on hopes of an MSCI inclusion, while LTIMindtree and JSW Steel are likely to gain on account of their probable inclusion in the Nifty 50 and Sensex, respectively.

As for the week gone by, the market reached a new peak on Friday, with all four frontline indices (Sensex, Nifty, Nifty Bank, and Midcap indices) reaching record highs. The market also recorded its biggest quarterly gains in nearly two years, with the Nifty up by 10 percent.

"The market is at an all-time high, but the momentum has just started as the overall structure is bullish with a potential target of 21,000 for Nifty by the year-end. Consequently, investors should stay invested, and any decline should be taken as a buying opportunity," Pravesh Gour, Senior Technical Analyst, Swastika Investmart, said. However, he also advised investors to use this rally as an exit opportunity for low-quality stocks.

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