The down move was supported by fresh short positions, but most of them are now out of the system as the open interest has declined by 23.88% on the expiry-to-expiry basis.
The March F&O series started with bearish positions as a good amount of shorts got rolled from February. The benchmark indices started correcting from the first trading session of the March series and continued to make lower lows for the major part of the series.
Our market nosedived after an outbreak of coronavirus in India and the volatility index (India VIX) reached a multi-year high of 86.64 levels during the month.
Nifty50 didn’t respect any support levels and fell towards 7,500-mark. However, due to some short covering in the last three sessions, Nifty concluded the March series above 8,600 levels, with a loss of 25.72 percent, which is the biggest series-on-series loss since Oct 2008.
The down move was supported by fresh short positions, but most of them are now out of the system as the open interest has declined by 23.88 percent on the expiry-to-expiry basis.
Rollover stood at 62.12 percent, which is lower than its last month and a quarterly average of 77.65 percent and 71.46 percent, respectively. The positions unwinding was seeing mainly due to the new rule to curb volatility and short selling in the market.
Ongoing fall was majorly led by sharp selling from foreign institutional investors' (FIIs) desk as they remained net seller in the cash market segment on all trading sessions of March series and cumulatively sold equities worth Rs. 60,192 crore in March series, which is their biggest selling figure in a month in the last thirteen years.
At the same time, DIIs bought equities to the tune of Rs 54,386 crore. However, FIIs exited some of their short positions in index futures in the March series.
As a result, their ‘Long Short Ratio’ in the index futures moved from 13.85 percent to 29.63 percent. On the options front, open interest activity is scattered at 9,000, 10,000 and 11,000 call options; while highest Put OI is at 8,000, 7,500 and 7,000 strikes.
India VIX is still above 70-levels which indicates bear grip and volatile swing could continue in the market. The Nifty’s intraday movement of 400-500 points swing could be new normal in such kind of scenario till volatility doesn’t cool down from its historical eleven years high.
As of now, the index is light on positions and further build-up will decide the future trend in the market. Going forward, crucial support for Nifty50 is placed at 7,500 and then 6,800 levels. On the upside, the crucial resistance level is placed at 9,600-10,000 levels.
Bank Nifty also started correcting from the initial days of March expiry and continued its negative momentum for the major part of the month. It underperformed the benchmark indices and fell by 35 percent in the March series.
Some short formation was seen in recent fall; but most of these shorts didn’t get rolled to the next series as Rollover stood at 55.19 percent, which is much lower than its quarterly average of 71.86 percent.
Open interest also reduced by around 20 percent on a month-on-month basis and as a result, total OI reached the lowest level since Oct 2019 expiry.
At the current juncture, support for the banking index is placed at 16000 and then 14800 levels; while resistance can be seen around 22,000–22,500 zone.
Out of these stocks, a good amount of shorts were rolled to April series in stocks like IndusInd Bank, Axis Bank, Federal Bank, and RBL Bank.
On stocks front, we haven’t witnessed any noticeable long rollover in any stock. While stocks which added huge shorts and the same got rolled to the next series are Vedanta, IndiGo, IndusInd Bank, Petronet LNG, Titan Company, TCS, Axis Bank, Federal Bank, and RBL Bank.
Note: This note is just an interpretation of derivative data and not a trading advice.
(The author is a technical and derivatives analyst at Motilal Oswal Financial Services)Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.