Record breaking FII inflows are driving the show as stellar moves are seen in Bank Nifty, which was up ~20 percent expiry to expiry lapping up gains of +40 percent in two back-to-back series.
Indian market exhibited massive record run as bazooka unleashed with ~USD 7.6 billion flows in November series itself - highest ever in a single month. Highlights for the November series are short-squeezed followed by long buildup on Banking and Financials, India VIX dropped to ~20 mark as markets welcomed US election outcome.
Reliance Industries' massive underperformance in past two series as banking made comeback to driving seat, and record turnover in F&O segment on expiry day indicates participation across the board.
Rollovers for Nifty/Bank-Nifty stood at 79 percent (1.2 crore shares)/79 percent (14.8lakh shares), respectively against 77 percent (1.05 crore shares)/73 percent (16.5lakh shares), respectively, previous month. Aggregate base of number of shares rolled were higher ~15 percent compared to previous month on Nifty while roll cost expanded to ~50 points on expiry day as buoyancy seen at record close.
Market-wide rolls remained higher ~93 percent against 3-month average of ~91 percent, sharp declines in options implied volumes indicates traders bracing for consolidation of gains.
FII’s derivative stats, index futures long rolls stood at 91 percent against 3-month average of 69 percent while index futures short rolls at 50 percent against 62 percent on 3-month average.
December series starts with index futures long to short ratio of 3.37x against 3-month average of 1.5x at start of series. On options front, max. call/put OI on Nifty for December monthly series stands at 13,000 Call (OI 2.5 mn) and 13k put (OI ~2mn) contracts.
Near-term overstretched indicators suggest mild mean reversion possible as Index to consolidate and digest the gains made in past two series with wild intraday gyrations to continue.Sectors:
Sharp short covering seen on Banking stocks with State Bank of India, HDFC Bank and Bandhan Bank saw aggregate shed in OI from previous expiry with strong gains.
Auto: Maruti Suzuki standalone on the only auto stock to close negative eoe basis, with hint of short buildup, Hero Motocorp also faced shorts at higher levels, Balkrishna Industries saw massive jump in long buildup base of ~80 percent OI fresh addition.
Energy: Reliance Industries is the only stock negative in 0il & gas space with bouts of shorts buildup seen at higher levels.
Strategy for next week:
Bull call Ratio spread on Bank Nifty December series weekly expiry December 3): 3 leg
Buy Call Strike 29,500 and Sell strike 30,000 Call and Sell 30,500 Call with outflow of ~58 points. (1:1:1)
Target: 250/400 on Spread
Stop loss: 31,000 on Bank Nifty December futures, unlimited loss above 31,000 breakeven point.
Payoff for the strategy: Bull call ratio spread
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd. which published moneycontrol.com
The author is Senior Derivatives Analyst – Institutional Equities, YES SECURITIESDisclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.