The Nifty50 started the April series on a negative note as we witnessed selling pressure towards 8,055 levels in the first week of the new series. However, it started rebounding from lower levels and rallied by more than 18 percent in the last four weeks.
Eventually, the Nifty50 concluded the April series with a gain of 14.1 percent, the biggest series-on-series gains after May 2009.
The index was light on positions after March derivatives expiry and added marginal longs in the recent upmove. However, most of the positions didn’t get rolled to the April series as open interest had decreased by 16.99 percent on an expiry-to-expiry basis.
Rollover stood at 71.29 percent, which is higher than its quarterly average of 68.69 percent. But, traders shouldn’t get carried away with high rollover figures, as that is mainly due to the low base of open interest (OI).
The volatility index (India VIX) has corrected by more than 50 percent since the March series and reached 34 levels. VIX is cooling down for the last five consecutive weeks, which provided some stability to bulls.
The upmove was supported by FIIs long positions in the derivatives segment as they continued to buy the index futures and also did a good amount of short covering.
As a result, their ‘Long Short Ratio’ in the index futures has moved from 27.41 percent to 64.43 percent. However, they remained net sellers in the cash market segment and cumulatively sold equities worth Rs 12,262 crore in April series.
At the same time, DIIs bought equities to the tune of Rs 8,005 crore. On the options front, open interest activity is scattered at 10,000, 9,500, and 11,000 Call options; while the highest Put OI is at 9,000, 8,500, and 8,000 strikes.
As of now, the index is light on positions and further build-up will decide the next trend in the market. Going forward, crucial support for the Nifty is placed at 9,000-8,800 zone; while a sustainable move above its hurdle of 10,200– 10,400 zone would be a challenge for bulls.
The Bank Nifty relatively underperformed the benchmark indices and ended the April series with gains of 9.79 percent over its March series close. For the major part of the series, the Bank Nifty moved within the trading territory of the first five trading sessions of April series.
We witnessed a good amount of long build-up in the recent upmove and most of these positions are still intact in the system as open interest increased by 20.82% on M-o-M basis.
Rollover in the Bank Nifty stood at 81.59 percent, which is higher than the quarterly average of 64.10 percent. Overall derivatives data of the Bank Nifty is relatively positive than the Nifty and thus, the ongoing bounce of banking index may continue towards 23,000 and then 24,500 zone.
While major support for the Bank Nifty is now placed at the 18,700–19,000 zone. From banking space, we witnessed long rollover in HDFC Bank, ICICI Bank, and Federal Bank.
Since overall positions were on the lower side after March expiry, fresh build-up at the low base has resulted in a sharp increase in the change of open interest.
Out of 143 stocks from derivatives space, 116 counters witnessed rollover of more than 90 percent, which indicates decent positions get carried to the next series.
On stocks front, we witnessed a good amount of long rollovers in pharma space (Torrent Pharma, Lupin, Biocon, Cadila Healthcare, Glenmark, Cipla, Dr Reddys Lab) followed by other counters like Tata Chemicals, IGL, Manappuram, Hero MotoCorp, Bajaj Auto and Petronet.
While stocks which added shorts and the same got rolled to the next series are PVR, Bajaj Finance, RBL Bank, Bank of Baroda, and Tata Power.
Note: This note is just an interpretation of derivatives data and not trading advise.
(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.