Low rollover seen ahead of Budget; Nifty rollovers at 66.30% for Feb series

The Nifty is starting the new series with just 10.2 million shares, which is the lowest OI at inception in more than a decade. The continued lower OI can be attributed to the closure seen among short positions in the last couple of weeks.

Moreover, the upcoming Budget may have prompted the closure of positions. The roll spread has also remained under pressure and did not move above 40 points due to a lack of fresh long additions.

The Bank Nifty is starting the new series with relatively high OI with almost 1.2 million shares. The continued weakness seen in private sector banking heavyweights may have triggered some fresh positions.

The recent underperformance of the banking index over the Nifty can be attributed to marginal increase in OI. However, roll spread in the banking index stayed subdued and was seen around 130 points for most of the week.

The Nifty remained broadly weak during settlement but the highest Put base of 12000 strikes helped it to remain above these levels. In the last hour of the trade, some VWAP buying pushed Nifty and Bank Nifty marginally higher.

Overall, the broader participation was seen in the recent up move whereas heavyweights from banking and technology have remained muted. Metal and PSU banks turned out to be most volatile space of the January series

The low rollover was seen across sectors where midcaps, as well as heavyweights, have seen below-average rollover into the next series.

Union Budget during the weekend might be a reason behind low rollover and fresh positions are likely to build post-event.

On the options front, the new series is starting with the major Call and Put base at 12500 and 12000 strikes, respectively.

We expect Nifty to find support around its previous lows near 11950 levels amid volatility and above which one should trade with positive bias. On the higher side, we expect the Nifty to test fresh highs in the coming weeks.

Among heavyweights, select metal and Pharma stocks are starting the new series with relatively high open interest. On the other hand, major short covering was seen in Cement and Auto space.

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