Indian market kicked off the May series with light positions and started correcting in the first few sessions of the series. We witnessed some short build-up in the corrective move, but Nifty took support around the 14400 zone and started rebounding sharply. The index made 'Higher Tops Higher Bottoms' on the daily chart and registered a new all-time high on closing basis on expiry day. Eventually, it concluded the May series with gains of 3 percent and formed a bullish candle on the monthly chart.
We witnessed the formation of some long positions in the recent up move and some of these positions got rolled to the next series. Rollover in Nifty stood at 77.28 percent, which is marginally higher than its quarterly average of 75.4 percent. Open interest also increased marginally by 2.3 percent on an expiry-to-expiry basis.
The sentiments are again turning in favour of the bulls amid fall coronavirus cases, hopes of re-opening of economic activities and better quarterly numbers. Market Breadth also remained strongly in favour of the advancing counters as mid and small-cap space showed tremendous strength. Buying interest was across the street as all major sectoral indices ended the May series in positive territory. Among them, PSU Bank, Media, CPSE and PSE indices were major gainers.
India VIX decreased by 14.55 percent to 19.91 levels in the May series. Volatility needs to sustain below 20 zones to support the bullish market set up with a higher market base.
FIIs remained net seller in the cash market segment in the May series and cumulatively sold equities worth more than Rs 12800 crore. On the other hand, DIIs were marginal buyers pumping in Rs 2031 crore. However, FIIs added a good amount of long positions in index futures and exited some of their short positions in the last two weeks. As a result, their ‘Long Short Ratio’ in index futures has shoot-up to 88.87 percent.
On the options front, maximum Put OI is at 14000 followed by 14500 strike while maximum Call OI is at 16000 followed by 15800 strike. Option data suggests a trading range in between 15000 to 15800 zones. Considering overall derivatives activity, we are expecting the Nifty to move towards 15800-16000 zone in the coming weeks. While major support is now placed at 14900 and 14600 zone.
Bank Nifty remained in the negative territory in the first fortnight of the May series and fell below the 32000 mark. However, it took support around 32000 zone and formed a double bottom pattern on the lower time scale. We witnessed a sharp rally in the banking index in the second fortnight and it outperformed the benchmark indices. Eventually, it concluded the May series with gains of over 4 percent above the 35000 mark.
We witnessed the formation of long positions in the recent up move and most of these positions got rolled to June series as open interest has increased by 26.73 percent on an expiry-to-expiry basis. Rollover in Bank Nifty also stood at 80.76 percent, which is higher than its quarterly average of 76.84 percent. Rollover data clearly indicates that long are intact in the banking index and thus, we can see a continuation in ongoing outperformance in coming days too.
As far as levels are concerned, crucial support for the banking index is placed at 33200 and then 32000 zone. On the flipside, immediate resistance can be seen around 36500 and 37700 zone.
On the stocks' front, we witnessed a good amount of long rollovers are Coforge, Bank of Baroda, PNB, Concor, Berger Paints, Mphasis, Cadila Healthcare, Pidilite Industries, NMDC, IOC, Godrej Consumer, etc. While stocks like Bandhan Bank, Cummins India, Info Edge, Amaraja Batteries, Cholamandalam Investment, M&M Financial, etc had short rollovers.
Note: This note is just an interpretation of derivative data and not trading advise.
The author is technical and derivatives analyst, Motilal Oswal Financial Services
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