Nifty, Bank Nifty Snap Three F&O Series Losing Streak
In September series, Nifty 50 gained 5.7 percent and Nifty Bank rose 9.9 percent—their best gains in an F&O series since March.
The Nifty index’s futures and options series snapped its three months losing streak in September after India unexpectedly cut corporate tax rate to revive growth.
The benchmark index was headed for its August lows of 10,637 but reversed losses to post its biggest single-day rally in a decade. In the September series, the Nifty 50 Index gained 5.7 percent and the Nifty Bank Index rose 9.9 percent—their best gains in an F&O series since March.
Last week, the government brought down India’s effective corporate tax rate to among the lowest in Asia as it aims to revive the economic growth from a six-year low. The move, which is expected to cost the government Rs 1.45 lakh crore in revenue, led to a surge in equity indices. Analysts and corporates expect lower tax to boost profit growth and make India a favourable investment destination.
The Nifty index reversed the trend sharply since last week from the lows of 11,670 with intensity in the price move, 1,000 points from the bottom in five trading days, Amit Shah, investment analyst at BoB Capital Markets Ltd., told BloombergQuint. A strong move can be seen if the index manages to cross 11,670-11,700 mark decisively, he said, adding the expiry close is seen with a positive bias, as the previous day’s fall was recouped quite strongly and showed a close above the previous day’s high of 11,570.
Technically, the Nifty index holds momentum support at 11,400 and immediate resistance around 11,700. So, sustaining above this can encourage further buying momentum towards 12,000 or above. However, any violation below 11,400 can lead to profit-booking in the market. Unless 11,400 isn’t violated, the bias remains positive, Shah said.
To be sure, starting October series from Sept. 27, all stock derivatives will be settled physically.
Nifty Rollover
The Nifty futures rollover for October series had an open interest of 1.55 crore shares compared with 1.8 crore shares in the previous contract because of short covering in the expiry week.
In percentage terms, however, the rollover was higher at 73.1 percent against 68.8 percent in the previous series. That came as a significant rise in open interest was seen directly in the October contract, especially on Sept. 20 when the index rallied more 5 percent after the tax cut was announced. The rollover cost was in line with the previous series at 0.53 percent.
“I think it’s been a very turbulent ride for the September series where in just one day we had the entire sentiment changing and it was good that it came a week before the expiry had to happen and that turned the entire sentiment around the overall rollovers as well,” Tushar Mahajan, head (derivatives) at Centrum Broking, told BloombergQuint. “On the stocks side, the rollovers have been very strong. It could also be because more stocks moved into physical delivery, so people prefer to roll their stocks.”
“The disappointing data is on the index side, which is both Nifty and Bank Nifty. Overall, we are starting the series with a fairly low open interest on the index side but that’s also because a lot of the option writers who were caught on the wrong side after the announcement last Friday and on Monday let go of their positions,” Mahajan said.
“So, the index positions are light. But it’s not a real point of concern now. We’ll see it as volatility comes back, those positions getting built up. But the underlying trend if I were to summarise would be very positive as we head into the October series,” he said.
Some of the spaces that saw heavy rollovers are private sector banks such as ICICI Bank and HDFC Bank, he said. Another space which has seen very sharp rollovers is the healthcare. So, stocks like Lupin Ltd., Cadila Healthcare Ltd., Divi’s Laboratories Ltd. have seen a sharp rollover.On the weak side, rollovers in Maruti Suzuki India Ltd. have been lesser than average. Lower rollovers on absolute basis were also seen for Hindustan Unilever Ltd. and Infosys Ltd., according to Mahajan.
Nifty Bank Rollover
The Nifty Bank rollover for October series stood at 57.6 percent with an open interest of 0.09 crore shares, compared with a rollover of 66.4 percent in September contract with an open interest of 0.15 crore shares. That implies short covering of positions.
The rollover cost was higher at 0.76 percent against 0.49 percent in the September contract, mainly on account of sustained buying interest in the next series.
Nifty IT Rollover
The Nifty IT index underperformed compared to other major indices as it fell 3.6 percent in the September series.
Still, the rollovers were higher with an open interest of 12,000 shares compared with 9,000 shares in the previous contract. In percentage terms, however, the rollovers were lower at 75.7 percent against 81.5 percent in the September series.
Market-Wide Rollover
The rollovers across stock futures were at 94 percent with an open interest of 393 crore shares—that’s considered high as 12 stocks in the F&O segment are moving out from October series. The market-wide rollover in the September contract stood at 90 percent.
In the September series, total stocks in the derivatives market stood at 161. The market breadth turned in favour of buyers after three series, as 122 stocks advanced and 39 declined.
Sector Rollover
- Positive rollover: Auto and auto ancillary, private banks and oil & gas
- Neutral: Cement, consumer goods and pharmaceuticals
- Negative rollover: PSU banks, metals, power and technology
FII Set Up Ahead Of October Series
Foreign institutional investors have net short positions for the third straight series in October. On index futures, FIIs are net short with 66 percent of the contracts being taken on the short side.
On index options, too, FIIs are net short at the start of October series as they hold more put long and call short contracts.
BoB Capital Market’s Amit Shah’s bets for October series based on rollovers and technical analysis…
Long Bets
- Finance: Cholamandalam Investment & Finance Company, ICICI Prudential Life Insurance Company Ltd.
- Oil & Gas: Reliance Industries Ltd., Bharat Petroleum Corporation Ltd.
- Banking: ICICI Bank
- Consumer Goods: Nestle India Ltd., Hindustan Unilever Ltd., Tata Global Beverages Ltd.
- Engineering: Siemens Ltd.
Short Bets
- Bankg: Union Bank, Canara Bank
- Pharma: Biocon Ltd., Cipla Ltd., Lupin Ltd.
- Financial Institutions: Equitas Small Finance Bank, Indiabulls Housing Finance Ltd.
- Technology: Wipro Ltd.
- Media: Dish TV India Ltd.
Watch | what Tushar Mahajan has to say about the September F&O series.