Nifty F&O Series Falls For Third Straight Month In February
The Nifty index’s futures and options series fell for the third straight month in February over fears of the Coronavirus impacting global trade and supply chains.
The NSE Nifty 50 and the Bank Nifty indexes fell by around 3.3 percent and 1.5 percent, respectively, this month. Both the indices are trading at their lowest in four months and below their crucial 200-DMA (daily moving average).
Markets in the U.S. and Europe were rattled this week on the back of fears of escalation of the virus to more countries. Investors are, thus, flocking towards havens like gold—prices of which have risen to a record in India. Foreign investors have been selling Indian equities for the second straight month: they’ve sold equities worth nearly Rs 16,000 crore so far this year.
The India Volatility Index—the popular fear gauge that tracks investors’ perception of volatility for a month ahead—went up 30 percent in the expiry week at a time when volatility levels spiked globally.
Series laggards included the likes of NCC Ltd., Vodafone Idea Ltd., BHEL Ltd., LIC Housing Finance Ltd., and Bharat Electronics Ltd. Auto stocks, including Maruti Suzuki India Ltd., Hero MotoCorp Ltd., Tata Motors Ltd. and Bajaj Auto Ltd., too, ended the series with heavy losses as their supply chains were affected by the virus outbreak.
Nifty Levels To Watch
On the option front, maximum ‘Put OI’ for the March series is at 11,800 followed by 11,700 while maximum ‘Call OI’ is at 12,000 followed by 12,500.
Options data is scattered at nearby strike, thus not giving any sense for immediate range while as per volatility, broader trading range could be 11300 to 12000 zones, according to Chandan Taparia, derivatives analyst at Motilal Oswal Financial Services.
Taparia said there’s a “positive setup” for Pidilite Industries Ltd., Max Financial Services Ltd., Apollo Hospitals Enterprise Ltd., Berger Paints India Ltd., Hindustan Unilever Ltd., Axis Bank Ltd., Kotak Mahindra Bank Ltd. and Dabur India Ltd. while negative setup would continue among PSUs, metals and automobile stocks.
The Nifty futures rollover was high in absolute and percentage terms. The March series started with open interest of 1.52 crore shares compared with 1.08 crore shares in previous series due to fresh short positions. In percentage terms, the rollover stood at 77.6 percent against 66 percent in the previous month.
Nifty Bank Rollover
The Nifty Bank rollovers were mixed, higher in percentage terms but lower in open interest. The rollovers in percentage terms were 75 percent compared to 62 percent in the previous series. In terms of open interest, the March series starts with open interest of 0.10 crore shares against 0.12 crore shares.
Nifty IT index fell 1 percent for February series. The rollover trend, however, looked the same at 91 percent against 92 percent in line with the previous contract.
The rollovers across stock futures were higher in absolute terms with series starting with open interest of 420 crore shares compared to 406 crore shares in the previous contract. In percentage terms however rollover was 86 percent compared to 89 percent in the previous contract.
Market Breadth Of F&O Stocks
Market breadth was negative across stock futures. As many as 103 out of the 140 stocks in the F&O segment declined while 37 advanced.
Positive Rollover: Cement, Consumer Goods, Finance, Pharma, Telecom
Negative Rollover: Fertiliser, Power, Technology
FII Set Up Ahead Of March Series
Foreign institutional investors, at the beginning of the series, are net short by 136,035 contracts against being net short with 75,442 in the previous series. The investors turn net short for two straight series now.
On index options, foreign investors are starting the series on a mixed note with buying protection via puts to hedge themselves against uncertainty but are also selling more puts, indicating limited downside.