Volatility is expected to remain high in the near term and the index will make another bullish attempt over the next few weeks.
The Nifty started the September series on a positive note but failed to sustain 11,700 levels. Selling pressure pushed the index down to 11,200. This was followed by a bounce back towards 11,600-11,650. The broader market sentiment failed to gain strength, which eventually led to a deeper correction towards 10,800. IT stocks managed to outperform while banking, infra and metal stocks witnessed deeper cuts.
The October series is expected to witness sideways movement with a negative bias. The broader market sentiment that turned negative in early September continues to be so.
Unless we witness a change in the sentiment along a direction trigger on the options data front, we will continue to hold sideways to negative stance. For the medium term, we believe the Nifty support zone is seen at 10500-10700, we expect the same to be held.
Marketwide rollover was seen at 93 percent. The Nifty rollover was seen at 71 percent as compared to three-month average of 79 percent. The Nifty options concentration was seen at 10,500 Put and 11,000 Call options.
In index futures, FII segment remained negatively biased, while PRO is net long. In the index options space, both remain aggressively negative.
Pharma and metals have witnessed strong rollover along with a negative sectoral momentum, which indicates a further pressure. Realty and IT have seen lower positions being rolled over and suggest reduction in selling pressure in the near term.
We expect volatility to be high in the near term and the index to make another bullish attempt in the next few weeks. Unless the same gets triggered, keeping leverage under control is advisable. This is an attractive phase for investors to gradually accumulate for the long term.
The author is Head of Research-Derivatives at Kotak Securities.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.