Nifty Posts Worst F&O Series So Far This Year As India Lags Global Peers

The Nifty index posted its worst futures and options series so far this year as Indian benchmarks underperformed global peers on account of economic slowdown, liquidity crisis and delayed onset of monsoon. Yet, traders carried forward their positions into the July series ahead of Union Budget 2019.

The Nifty rollover data for July series stood at 80.4 percent with an open interest 1.92 crore shares, against 71.9 percent in the June contract, according to data available on National Stock Exchange's website. That’s because investors took fresh positions in the next series. The rollover cost is higher at 0.55 percent than 0.27 percent in the previous series because of a dividend impact.

In the last series, quarterly earnings were announced. Most of Nifty 50 stocks had some dividend payouts, Amit Shah, investment analyst at BOB Capital Markets Ltd., told BloombergQuint.

“During the earnings season, we saw rollover cost remain on lower side. Last series, the rollover cost was close to around 0.27 percent and this time it is around 0.55 percent,” said Shah. “Definitely, it will look like an increase. But if I have to compare rollover cost to April series, then the cost is around 0.67 percent. That’s where the dividend will play a critical role.”

In the June series, both the Nifty 50 Index and Nifty Bank Index hit lifetime highs. The India VIX Index—the popular fear gauge that tracks investors’ perception of volatility for a month ahead—fell 6 percent during the period. Still, the series saw negative returns as the Nifty Index ended with a loss of 0.9 percent or 104 points, and the Nifty Bank Index shed 0.8 percent or 267 points.

“In the entire June series, the market has struggled to cross the 12,000 mark. It will be key to watch out how the open interest pans out from here on,” said Shah.

“Technically, 11,800 will act as momentum support and, on the upside, 11,960 is the key resistance which is seen. Unless and until the range is not violated, we may see open interest again hovering in a band of 1.8-2.2 crore-odd shares,” Shah said.

Nifty Bank Rollover

The Bank Nifty contracts witnessed liquidation of position by traders in the June series. The bank futures have an open interest of 0.18 crore shares at the beginning of July series compared with 0.19 crore in the previous contract. In percentage terms, however, Nifty Bank rollovers were higher at 83 percent against 81 percent in preceding series.

Nifty IT Rollover

The Nifty IT Index ended flat in the June series. Rollovers were at 90 percent with open interest of 15,000 shares against 93.7 percent in the previous series with an open interest of 19,000 shares, indicating liquidation of long positions.

The rollover cost was higher at 0.24 percent compared with a negative 0.28 percent in the previous series.

Market Wide Rollover

The market-wide rolls showed a steep drop mainly after 34 stocks were excluded from the futures and options trading. The rollovers were at 86 percent with an open interest of 361 crores shares against 90 percent in the previous series with an open interest of 431 crore shares.

The market breadth of F&O stocks remained negative in the last three expiries. For the June series, the advance-decline ratio stood at 2:1, favoring the declines.

Sector Rollover

• Positive rollover: Engineering, metals and power
• Neutral rollover: Banking, cement and information technology
• Negative rollover: Auto and auto ancillary, consumer goods, media, pharma

Stocks For July Series

The three counters within the overall space on which Shah would be betting in the July series:

• CESC: The stock has seen a series of higher top and higher bottom formation since the closure of April contract and has seen a good traction of open interest and volumes.
  The stock is done with consolidation. It has taken multiple support levels close to 650-700-odd zone. It is back to above the 750-odd mark.
  The stock in the next leg of uptick can see 880-900-odd levels on higher side. Any decline toward 760-765 should be treated as re-entering into the stock and can see some good amount of open interest for the series.
• Havells: This stock has been a steady performer irrespective of market volatility. It has touched a high above the 800-odd mark today and sustained with very strong volume interest traction. So, the stock has a lot of potential from here on.
  The stock can head toward 950-1,000-odd levels. On the downside, 770 will act as a very good support and possibility of 850-860 can be anticipated in the series.
• L&T: This would be slightly on shorter- to medium-term perspective. L&T has been hovering between 1,450 and 1,250-odd levels in the last 12-14 months.
  For the first time in the June series, the stock has given a breakout of this and a wide consolidation band for such a long time frame. The stock has potential to head toward 1,800-1,850-odd levels in medium term. In short term, one can expect close to around 1,650 level around the upside. Downside it has support around 1,500-odd mark moves.

The three counters Shah is cautious on

• Sun TV: Not good traction overall in the media sector in terms of rollovers.
  Sun TV has been underperforming since 650-odd levels. Since April, the stock has been making lower bottom formation. Even recently the stock has been struggling to cross above 545 and 530 odd hurdles. It has been witnessing a stiff resistance around those range and is expected to continue.
  The stock is almost on the verge of giving a monthly breakdown, which is close to 500-odd levels. Once it does, the possibility of downside toward 460 to 450 cannot be ruled out.
• TVS Motor: The stock has been witnessing a steady downtrend. In June series, the stock failed more than 95 percent of the time to cross previous day’s highs. The more it sustains below 445-450, the more weakness it can see toward 405-380 odd levels in lower range. On the upside, it will face some resistance around 450-455 odd level.
• Reliance Infra: The risk reward will not remain that interesting because of the high beta stocks, and it has seen a sharp fall in last couple of weeks. After many years, the stock has violated the monthly support in May series which was close to around 220-odd level. On the upside, the stock has resistance at 65-odd levels. On the lowerside, the stock has breached 50 can test levels of 40 and lower.

“I will wait for some time. If it’s above 11,800 (for Nifty) for this week closing, then maybe for next week I will recommend bull call spread,” Shah said.