Currently, Bank Nifty is light on positions and further open interest build-up in coming days shall provide a directional move in the index.
Nifty opened in the positive and remained consolidative between 10,310 to 10,400 levels for the most part of June 26 session. It was witnessing buying interest on the decline as every small dip was being bought.
Nifty formed a Doji on daily while small body candle on a weekly scale which indicates consolidative market action with buy on decline strategy. The index has been moving in a rising channel on the daily scale by connecting swing lows of 7,511, 9,004 and 9,544 and 9,845 levels.
It has given the highest weekly closing in the last 14 weeks and supports are gradually shifting higher which has an overall bullish implication. Now, the index has to continue to hold above 10,333 levels to witness an up move towards recent swing high of 10,555 levels while support shifts at 10,300 then 10,250 levels.
Being the expiry week, the focus was on rollover activity for the most part of the week and we saw some long positions getting rolled to July series as net open interest increased 13 percent on series on series basis. Rollover in Nifty stood at 78.93 percent, which is higher than last month as well as above its quarterly average of 69.70 percent.
We witnessed buying across the board as all sectoral indices ended the June series in the green. Among them, beaten down sectors like PSU banks, Realty and Media were major gainers. The marketwide rollover is at 91.67 percent and the majority of the positions are on the long side. Market breadth also remained strongly in favour of advancing counters in June, which is a positive sign for the market.
India VIX fell by 4.07 percent from 29.96 to 28.74 levels on a weekly basis. Falling volatility suggests overall bullish bias and the emergence of multiple supports at small declines. It remained down for 2 out of 5 days in the week but overall lower volatility provides comfort to bulls to form the higher market base. It remained quite choppy for the entire week as sentiments remained flip-flopped as Option writers were having a tight grip in between 10,200 to 10,500 levels.
Since it is the beginning of a new series, the option data is scattered at various strikes. On option front, maximum Put open interest was at 9,000 followed by 10,000 strike, while maximum Call open interest was at 11,500 followed by 10,500 strike. We have seen marginal Call writing in 11,200 and 10,800 strike while Put writing was seen at 10,000 then 9,500 strike. Option data suggests a wider trading range in between 9,800 to 10,800 levels.
In June series, FIIs remained net buyers in cash market segment to the tune of Rs 11,644 crore, while DIIs sold equities worth Rs 990 crore. On the other hand, FIIs exited their long positions and made some fresh shorts in index futures and as a result, their 'Long Short Ratio' of index futures has reached from 63.21 percent (May Expiry) to 42.43 percent (June expiry). Absence of FIIs flow is a reason that market is witnessing restricted upsides and now if volatility cools down then only FIIs money will be back in the Indian market.
Bank Nifty continued in the positive for the second consecutive session as the intraday decline was bought including the last hour of buying interest. It formed a small body candle with long lower shadow on the daily scale which supports buy on decline strategy but Doji formation on a weekly scale indicates absence of follow up action and stiff hurdle at 22,000-22,500 levels.
Now, immediate support exists at 21,300 then 21,000 for an up move towards 22,000 then 22,500 levels. Rollover in Bank Nifty stood at 80.60 percent, which is higher than its quarterly average of 72.64 percent. However, traders shouldn't get carried away with high rollover figure as this is also because of a low base of open interest. Currently, Bank Nifty is light on positions and further open interest build-up in coming days shall provide a directional move in the index.
Stock wise mainly we have seen buying interest and price - open interest breakout in most of the IT names like Mindtree, Infosys, TCS and Wipro. Apart from that positive set up is seen in Ujjivan Financial Services, BPCL, HPCL while weak structure is seen in Ashok Leyland, PVR and Bharat Forge.
The author is Vice President | Analyst-Derivatives at Motilal Oswal Financial Services.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.