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Nifty, Bank Nifty Fall For Third Straight F&O Series

The Nifty futures rollover for September series stood at 68.8 percent with an open interest base of 1.80 crore shares.

A trader reacts as he looks at financial data on computer screens on the trading floor at ETX Capital, a broker of contracts-for-difference, in London, U.K. (Photographer: Luke MacGregor/Bloomberg)
A trader reacts as he looks at financial data on computer screens on the trading floor at ETX Capital, a broker of contracts-for-difference, in London, U.K. (Photographer: Luke MacGregor/Bloomberg)

The Nifty index’s futures and options series posted loss for the third straight month in August as a slowdown in Indian economy, fears of global recession and escalating trade war tension dented sentiment.

Also, India’s move to roll back an additional levy on foreign funds and several other measures to revive the economy from a five-year low failed to enthuse investors. The secondary market witnessed a foreign capital outflow worth Rs 16,000 crore in August compared with Rs 15,000 crore in July.

In the August series, the benchmark Nifty 50 Index and Nifty Bank Index fell 2.7 percent and 6 percent, respectively. The market volatility, too, spiked during the period. India VIX Index—the popular fear gauge that tracks investors’ perception of volatility for a month ahead—rallied 30 percent during the August series.

The Nifty index in the last three months corrected nearly 12 percent to about 10,637. During this fall, it violated by whipsaw the critical intermediate trendline support of 10,700—this connects the lows in September 2017 at 9,687, March 2018 at 9,950 and multiple times between October 2018 and December 2018 (with a whipsaw low at 10,080),” Amit Shah, investment analyst at BoB Capital Markets Ltd., told BloombergQuint. A whipsaw pattern occurs in a volatile market where price fluctuations are unpredictable.

“Technically, the through around 10,700 has played out to support the pullback momentum for Nifty index, showing a rally towards 11,150, which has acted as a stiff resistance mark for the entire August series.”

The index now holds a pullback support at 10,900, Shah said. And if it continues to sustain below 11,000, the probability to violate the support shall increase and again the supports of 10,700 will be tested. “Any violation below 10,700 this time can lead to a sharp fall in the index toward 10,300-10,100 levels. For the index to continue to show some pullback strength, it needs to quickly trade above the short-term comfort level of 11,050 and 11,150. A weekly close above 11,150 with a strong market breadth can add the momentum further towards 11,350-11,400.”

Nifty Rollover

The Nifty futures rollover for September series stood at 68.8 percent with an open interest base of 1.80 crore shares, according to data available on the National Stock Exchange. That compares with a 73.7 percent rollover in August contract with an open interest base of 1.79 crore. The rollover cost, too, was higher at 0.53 percent compared with 0.48 percent in the previous series.

Nifty, Bank Nifty Fall For Third Straight F&O Series

Bank Nifty

The Bank Nifty contracts witnessed liquidation of long positions as well as creation of fresh short positions. The bank futures have an open interest of 0.15 crore shares at the beginning of September series compared with 0.14 core shares in the previous series. In percentage terms, however, the bank rollover was lower at 66.4 percent against 76.5 percent in the preceding series.

Nifty, Bank Nifty Fall For Third Straight F&O Series

Nifty IT Rollover

The Nifty IT Index outperformed peers as it ended 2.6 percent higher in the August series. Still, the rollovers were much lower at 81.5 percent with an open interest of 9,000 shares against 87.9 percent in the previous series with an open interest of 12,000 shares.

Nifty, Bank Nifty Fall For Third Straight F&O Series

Market-Wide Rollover

The rollover across stock futures was higher with an open interest of 394 crore shares against 374 crore shares in the previous series. In percentage terms, however, it remained flat at 90 percent. This suggests a significant addition of short positions in stock futures for the second straight series.

Nifty, Bank Nifty Fall For Third Straight F&O Series

The market breadth of futures and options stocks remained negative in the last five expiries. In the August series, only 58 shares advanced and 103 shares declined.

Nifty, Bank Nifty Fall For Third Straight F&O Series

Sector Rollover

Nifty, Bank Nifty Fall For Third Straight F&O Series
  • Positive Rollover: Consumer goods, oil and gas.
  • Neutral Rollover: Pharma, healthcare, information technology.
  • Negative Rollover: Auto and auto ancillary, private banks, PSU banks, metals and construction.
Nifty, Bank Nifty Fall For Third Straight F&O Series
Nifty, Bank Nifty Fall For Third Straight F&O Series
Nifty, Bank Nifty Fall For Third Straight F&O Series

FII Set-Up Ahead Of September Series

Foreign institutional investors, who have been selling incessantly in the cash market for the last two months, are entering the September series with net short positions on futures and options.

On Index Futures, FIIs turned net short in the August series itself. The September series starts with more contracts on the short side compared with August.

On Index Options, too, FIIs are net short at the start of September series as they hold more of “put long” and “call short” contracts.

BoB Capital Market’s Amit Shah’s Bets For September Series

Long Bets

  • ICICI Prudential
  • Asian Paints
  • Nestle
  • HCL Technologies
  • Petronet LNG

Short Bets

  • Amara Raja Batteries
  • Bank Of India
  • Cummins Industries
  • Vedanta
  • Wipro
  • Kotak Mahindra Bank