The Nifty started the October series with a very low base of open interest (OI) and started moving higher from the initial days of the new series.
The index rallied sharply in the first fortnight of the month along with a good amount of long build-up. The Nifty moved to its seven month high of above the 12,000 mark but it failed to sustain above those levels and started moving in a corrective phase. However, the down move was not supported by fresh shorts.
The market remained quite volatile in the last three weeks due to weakness in global indices, but it held above 11,600 zones. Eventually, it concluded the October series with gains of 8 percent over its September series close.
It formed a Big Bullish candle on an expiry-to-expiry basis. The rally was led by a decent up move in the Banking and IT sector.
The rollover in Nifty stood at 77.45 percent, which is slightly higher than its quarterly average of 76.05 percent. The Open interest also increased by 25.63 percent on expiry to expiry basis, which clearly indicates that some of the long positions formed in October get carried to the November series.
India VIX continued to remain positive for the second consecutive month and gained 2 percent to conclude the October series at 24 levels. A sustainable move above 25 zones may result in huge volatility in the market.
In the October series, FIIs remained net buyer in the cash market segment and cumulatively bought equities worth Rs 11,132 crores. While DIIs sold equities to the tune of Rs 14,350 crores in the same period.
Options data is scattered at various strikes. The maximum Put OI is placed at 11,000 followed by 11,500 strikes, while maximum Call OI is placed at 12,000 followed by 12,500 strikes.
We have seen marginal Call writing in 11,700 and 12,000 strikes, while Put writing is seen at 11,600 then 11,000 strikes. Options data suggests a wider trading range in between 11,200 to 12,000 zones.
Now, the Nifty has to cross and hold above 11,750-11,777 zones to get the bull’s grip for a bounce towards 12,020 then 12,200 zones ahead of the festive season.
On the flip side, major support exists at 11,500 then 11,333 zones. Traders should hedge their long positions ahead of the US elections.
The month gone-by was dominated by banking bulls as the private banking space saw a good amount of buying interest.
The banking index showed tremendous outperformance in October series as Bank Nifty rallied by around 18 percent in October. Bulls were aggressive from initial days and maintained their grip on Bank Nifty throughout the series.
We witnessed some long build-up in the recent up move. But most of these positions are now out of the system as open interest fell by 4.72 percent on a series-on-series basis.
Rollover in the banking index stood at 73.59 percent, which is lower than its quarterly average of 77.42 percent. Except for some loss in PNB, all other banking stocks ended in the green.
As far as levels are concerned, crucial support for the banking index is placed at 22,900–22,600 zone. On the flipside, immediate resistance can be seen around 25,200 zone.
On the stocks front, we witnessed long positions getting rolled to November series in counters like Ambuja Cement, Kotak Bank, Apollo Tyre, Adani Ent, Ultratech Cement, Ashok Leyland, Asian Paints, Ramco Cement, Colpal, etc. While stocks which added shorts are UPL, Reliance Industries, Sun Pharma, PNB, SBI Life, Torrent Pharma, BPCL, etc.
Note: This note is just an interpretation of derivative data and not trading advise.
(Jay Purohit, technical and derivatives analyst, Motilal Oswal Financial Services)
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