Nifty F&O Series Snaps Gaining Streak In December On Divestment Concerns
NSE Nifty’s future and options series snapped its gaining streak in December due to profit booking on the last two trading days.
The NSE Nifty Index’s future and options series snapped its gaining streak in December due to profit booking on the last two trading days over concerns that the government may not be able to meet its divestment target for the ongoing financial year.
Liquidity in global markets, strong foreign fund inflows, optimism around U.S.-China trade deal drove the indices to fresh highs during the series before they ended with meagre losses. The Nifty and Bank Nifty closed lower by 0.2 percent and 0.4 percent, respectively.
That comes after the Indian economy slowed further in the second quarter of 2019-20 and the Reserve Bank of India kept interest rates unchanged after five consecutive cuts due to inflation. Investors are now pinning hopes on the upcoming Union Budget as they expect the announcement of demand-side measures to spur consumption.
The lower volatility supported the markets at higher levels. India Volatility Index—the popular fear gauge that tracks investors’ perception of volatility for a month ahead—fell to multi-month low, correcting 20 percent during the series.
Metals stocks continued their gaining streak on improvement seen in global markets, hopes of renewed demand and higher prices which led to gains in stocks like NMDC Ltd., Tata Steel Ltd., Steel Authority of India Ltd. and Hindalco Industries Ltd.
Gold finance companies like Manappuram Finance Ltd. and Muthoot Finance Ltd. touched fresh all-time highs and information technology heavyweights—Infosys Ltd. and Tata Consultancy Services Ltd.—gained alongside firms like Mindtree Ltd. and NIIT Technologies Ltd.
Oil and gas stocks like Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd., Indian Oil Corporation Ltd., Reliance Industries Ltd. and GAIL (India) Ltd. were the top laggards during the series.
Rollovers for the Nifty were lower than average rollovers of the last three months. Chandan Taparia, analyst (derivative) at Motilal Oswal Financial Services, said rollovers in Bank Nifty were better and less rollovers in the Nifty indicate chances for financials to lead the momentum going forward.
Overall setup suggests that major support for the index placed at 11,800-11,900 zones while a follow-up could lead it towards the recent high of 12,300 and then 12,500 zone towards the Union Budget, which is going to be announced on Feb 1. 2020.
The lower volatility suggests that declines could be bought in the market with limited upside as well downside at the beginning of new series.
Nifty Rollover
The Nifty futures rollover were on the lower side both in absolute and percentage terms. The rollover for January series started with open interest of 1.22 crore shares compared with 1.47 crore shares in previous series due to profit booking at higher levels.
In percentage terms, the rollover stood at 70 percent against 80 percent in the previous month. The December rollover has been lower than the three-month average of 78.94 percent.
Nifty Bank Rollover
The Nifty Bank rollovers were higher than average rollovers. The rollovers were strong in percentage terms at 78.4 percent compared to 70 percent in the previous series.
In terms of open interest, the January series starts with open interest of 0.12 crore shares against 0.19 crore shares, suggesting profit booking. The rollover at 78 percent was higher than its three-months average of 64 percent.
Nifty IT
The Nifty IT index ended with gains of 4 percent in December series. The rollovers in absolute terms were lower with an open interest of 4,500 shares compared to 9,000 shares in the previous contract. In percentage terms, however, the rollovers stood at 91.8 percent against 92.5 percent.
Market-Wide Rollover
The rollovers across stock futures were lower at 91 percent against 93 percent with an open interest of 390 crore shares compared to 403 crore shares in the previous contract. Open interest was lower on account of profit booking seen in certain stocks.
Market Breadth Of F&O Stocks
Out of the total 147 stocks in the F&O segment, market breadth was negative with 57 stocks advancing against 90 stocks declining. Market breadth turned negative after three months.
Sectoral Rollovers
Strong Rollover: Capital Goods, Automobile, Pharma, Media
Weak Rollover: IT, Power, Telecom, Metals, Oil & Gas
FII Set Up Ahead Of January Series
Index Futures
Foreign institutional investors are net long with 23,392 contracts against 31,649 contracts at the start of January series. FIIs turned net long in December after being net short for four straight series on index futures.
Index Options
On index options, FIIs 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 downside to be limited.
