Navneet Daga
Nifty50 finally saw consolidation breakout above 9,150-9,200 zone led by short-covering moves on banking and financials. The BankNifty gained ~11 percent for the week while Nifty was up ~5 percent during the same period.
The markets gained traction in the past two sessions as global buoyancy in equities compelled FII’s to cover heavy short positions.
Options writers scrambled to cover short positions as large delta moved to force call writers to unwind positions on ATM strikes.
Rollovers:
Rollovers for Nifty/Bank-Nifty stood at 75 percent (1cr shares)/81% (14lakh shares) 71% (96lacs shares)/81% (10lakh shares) previous month.
The aggregate shares increased ~40 percent for BankNifty from the previous month. In May series, Rollcost on Nifty remained negative with ~(-25 points) to long rollers during expiry day.
FII Derivatives Stats:
Intense short-covering moves seen in the past two days as FIIs were unwinding index futures short positions to tune of ~53k contracts on a net basis.
The long/short ratio on index futures stands at 1.71x levels for the start of June series, while cash-based selling continued from FII’s.
On an aggregate basis from previous weekly expiry day (21st May) FII participants added significant stock futures long positions along with Index call buying and put selling, implying dips in the near-term are likely to be bought.
US markets saw a big up move as S&P moved back above 3,000 mark stocking catch up move for global equity indices. India VIX cooled down by another ~8 percent to 30 levels on a weekly basis.
India VIX likely to find support in the range of 30 mark, whipsaw moves expected on the back of global developments, as rally gathers momentum we are witnessing participation from broader markets indicating dips likely to be bought into in near term.
On the options front, June series starts with the buildup on monthly series 9,000 put strike holding ~2.2mn shares while on call 10k strike holding ~1.8mn shares.
Scattered buildup on options indicates wide trading range participants betting on while near term we expect a trading band of 9200 to 9600 for Nifty.
We believe post 32 percent rally from the low of 7,511, we believe that the ongoing Nifty's corrective phase is likely to continue. The recent price structure of descending lows and peaks indicates immediate hurdles near the 9,600-9,700 zone.
BankNifty continued its underperformance (this year so far BankNifty is down by 40% against Nifty’s 22% decline), expecting catch up trade on for Banking stocks after recent outperformance during the week.
Sectors:
The comeback of Banking and financial during the week and continuation of the uptrend from metals/auto stocks showing trends.
June series, setup indicates bouts of short-covering to continue from FII’s and catch up trade to global peers which will dictate the terms in the near future.
(The author is Senior Derivatives Analyst – Institutional Equities, YES Securities)
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