Nifty September rollovers slightly above average: Long rollovers in Pharma, Energy, NBFC; Short in Cement, Metals

Stock market trend

Indian benchmark indices were trading higher on 30 August, as NSE Nifty 50 entered into the September month derivatives series. The Nifty index recorded 77 percent rollover in derivatives positions, above its three-month average of 73 percent. The September 2024 series began with 13.66 million open contracts, up from 13.02 million in the previous series. In terms of open interest (OI), the Nifty starts the September series with the highest weekly OI at 25,000 put options (PE) with 1.61 lakh contracts, and 26,000 call options (CE) with 1.8 lakh contracts.

Overall Market Outlook

Soni Patnaik, Assistant Vice President of Derivative Research at JM Financial, said, "While the options matrix indicates that Nifty may continue its uptrend in the near term as long as it holds above 25,000, FIIs have aggressively hedged their positions in indices for this series. All’s well as long as it continues above 25,000/24,800."

"Overall, indices may test higher levels; however, stock-specific action may not exhibit the same strength. Book profits and stay hedged. Stocks have seen rollovers below their averages, which is a sign of caution," Patnaik added.

According to Nuvama Institutional Equities' rollover analysis report, "The ongoing bullish undertone is expected to persist, supported by abundant market liquidity. At all-time highs, volatility and market ranges could be wider than usual, but the market remains bullish, with no signs of slowing inflows or any structurally negative developments. Sectoral rotation is likely to occur more quickly than anticipated."

Sectoral Insights

Brokerage firms JM Financial and Prabhudas Lilladher highlight strong rollovers in sectors including NBFCs, Technology, Chemicals/Fertilizers, Energy, and Banking (specific stocks), with Pharma also showing resilience.

Mixed Signals: Mixed sentiments are observed in Capital Goods, Chemicals, FMCG, and Metals.

Short Squeeze: A short squeeze is seen in sectors like Pharma, Oil & Gas, Power, and Technology, indicating potential bullish moves as short positions are covered.

On the other hand, Nuvama believes that the automobiles sector should perform well over the next two series, with a long bias toward TVS Motors and Bajaj Auto, with a short bias in Tata Motors and Eicher. The overall festive season outlook for the auto sector is positive.

Read more: Bank Nifty September rollover lower than 3-month average; underperformance may continue in new series

Nuvama Institutional Equities highlights the following sector wise stock specific trends for the September series:

NBFCs: Long positions are strong in Shriram Finance, Muthoot Finance, Manappuram Finance, Cholamandalam Investment, and Piramal Enterprises, with other names potential short targets.

Pharma: Bullish sentiment dominates with longs in Alkem Laboratories, Cipla, Divi's Labs, and Laurus Labs. Zydus Lifesciences is a short candidate.

FMCG: Longs are favored in ITC, Tata Consumer Products, and United Spirits, while shorts can be created in Britannia and Nestle.

IT: The sector is bullish, with strong rollovers in Tata Consultancy Services, Tech Mahindra, HCL Technologies, and Coforge, while shorts are expiring in Mphasis.

Insurance: The sector shows continued strength with positive rollover data across all names.

Short Opportunities:

Banking: Short positions are strong in PSU banks, particularly Bank of Baroda, Punjab National Bank, Canara Bank, and State Bank of India.

Metals: Shorts are prominent in Tata Steel, NMDC, Jindal Steel, and Coal India, though Hindalco, Vedanta, JSW Steel, and Hindustan Copper are good long bets.

Cement: Weak rollovers suggest short opportunities in ACC, Ambuja Cements, UltraTech Cement, and Shree Cement.

Disclaimer: The views and investment tips expressed by investment 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.