Jay Purohit Centrum Broking
The November series started on a positive note as a lot of long positions rolled from the October expiry. The bullish momentum of the penultimate month continued in starting sessions of the November expiry and as a result, the index made a new ‘all-time high’ of 10,490.45.
But, foreign institutional investors (FIIs) didn’t participate in that up move as they started taking short positions in the index futures right from the start of the series.
They continued their selling momentum in the index futures throughout the first fortnight of the November series and as a result, their ‘Long Short Ratio’ (LSR) in index futures too came down from 70.40 percent (October 26) to 48.90 percent (November 16).
The Nifty50 failed to abide their selling pressure and corrected by around 400 points from its peak. Average of FIIs’ short positions in Nifty was around 10,370–10,420 and they defended that territory in the latter half of the November expiry when Nifty bounced back.
To get an exit with the profits, they didn’t give any chance to the Bulls on the expiry session and dragged the index lower below 10,250 level. At the current juncture, they exited 53 percent of their total positions in index futures on the expiry day ahead of events like RBI policy, US Federal Reserve meeting and Gujarat election; wherein shorts were more than the longs and as a result, the ‘LSR’ stood at 68.30 percent.
The November series F&O expiry ended with the loss of 1.13 percent over its previous expiry close. Rollovers in Nifty (63.28 percent) were below its quarterly average of 66.84 percent.
Also, rollovers were low in terms of open interest, indicating that the most of the positions formed in the last couple of months didn’t get carried forward to the next series.
At the current juncture, 10,000 put and 10,500 call options are attracting trader’s attention and will remain in a range for the index for the few sessions.
Rollover in BANKNIFTY (55.62 percent) was much below its quarterly average of 67.18 percent. In November series, we witnessed a good amount of open interest reduction in the banking index and as a result, open positions (Open Interest) in BankNifty are at the lowest level of the three years.
It indicates that most of the long positions, formed in the recent up move, are now out of the system. Since BankNifty is light on positions; formation of new positions will dictate the further movement of the index.
At the current juncture, strong support for the banking index is placed in the zone of 24,800-25,000 and a sustainable move below the same may not bode well for the Bulls as it will open a door for 24,000-mark.
On the flipside, 25,800-26,000 will remain a strong hurdle for the Bulls.
Stocks like Indian Bank, Biocon, Hexaware, Voltas, PC Jeweller, Jain Irrigation, Tata Power, Tata Elxsi, SRF and Dalmia Bharat added huge longs in the November series and the same got rolled to the coming month.
While in terms of stocks there were a good amount of short positions got rolled to the next series include names like Lupin, PFC, HPCL, Muthoot Finance, Vedanta, REC, Coal India, PNB, L&T Finance Holdings and Canara Bank.
Observations on Some Large-cap Counters:
Reliance Industries (RIL)
RIL started correcting right from the start of the November expiry along with a decent amount of short build-up. However, the stock rebounded in the latter half of the month; but we didn’t witness fresh buying in that.
High rollovers (88.42 percent) indicates that the shorts got rolled to the December series. Thus, the stock may remain under pressure and may even correct towards Rs860 – 850 levels. On the flipside, resistance for the stock is placed in the zone of 960 - 965.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
L&T traded in a narrow range of Rs1210 – 1270 throughout the November series; wherein, we witnessed the formation of mixed positions.
Rollovers were also in line with its averages. Thus, a sustainable move beyond mentioned range will result in a directional move in coming days.
ITC continued its bearish momentum for yet another month. In last month, the stock formed a good amount of short positions and the same got rolled to the December series.
At the current juncture, the stock has a support around Rs250 mark and a sustainable move below that may drag the stock towards Rs233 – 230 levels.
By looking at the month-on-month (MoM) data, it seems that Bharti Airtel added a good amount of short positions in the last month. But, a daily derivative activity clearly shows that the stock has formed mixed positions which are still intact in the system.
We would be vigilant on further development on derivative data front before initiating any direction trade in the counter.
November series, was not good for Aurobindo Pharma as it started correcting after the first week of the November expiry. The stock added a decent amount of shorts and the same got rolled to the December series.
Currently, the stock has a support around Rs670 – 675 and a breach of the same may lead to a correction towards Rs640 levels.
After a strong rally in the October series, Coal India started correcting from the first day of November expiry. The stock continued to add short positions along with the fall. Since rollovers (80.71%) are above its quarterly average, we may see a continuation of the bearish momentum in the counter.
HDFC corrected from its strong resistance zone of Rs1790 – 1800 and formed fresh short positions. High rollover clearly indicates that the shorts are still intact in the system. Thus, this stock will remain a sell on rise counter for us.
HPCL corrected sharply in the last month with huge short build-up. Rollovers (87.43%) are high than its averages and indicates that the shorts are still intact in the system. Currently, the counter has a support around 410 levels and a move below that may accelerate the correction towards 385 – 380 levels.
Maruti Suzuki witnessed a rally of more than 6 percent in the last series. But, we didn’t witness any meaningful open interest build-up in the expiry gone by. Rollovers (80.84%) are low in both percentage and open interest terms. Currently, the stock is light in positions and fresh build-up will decide the further move in the counter.
Tata Steel corrected by around 5 percent in the last (November) series with the rise in open interest on a month-on-month basis. If we look at the daily activities, the stock has mixed positions; wherein shorts are more than the longs. Rollovers (90.32 percent) are also on the higher side.
After the sharp correction in October series, Yes Bank corrected in November series too. Short formed in last month got rolled to December series too.
At the current juncture, the stock has a strong support in the zone of 285 – 290 and any positive development around that zone may result in a decent short covering move in the counter.
Disclaimer: The author is Technical & Derivatives Analyst at Centrum Broking Limited. The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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