By Nandish Shah
In the August series, Nifty broke out of the last two series trading variety (Our bullish view vindicated) to finish the series with the get of 5.44% to close at all-time higher. This is the highest series to series get given that the February 2021 series.
While the Nifty closed at an all time higher, we have seen the initial sign of deterioration in the market place breadth. Out of 162 F&O Stocks, 78 ended in the positive with the typical get of 7% even though 84 stocks ended the August series in the red with the typical loss of 8%. Bank Nifty continued its underperformance for the third consecutive series exactly where it ended the August series with gains of 2.67%.
In the Nifty we have witnessed a greater rollover of 84% as compared to the last 3 series typical rollover of 82%. We are beginning the Sept series with the Nifty future OI of 1.31 crore shares as against .95 crore last series. This is the highest OI at the starting of the series given that Feb 2020 (exactly where covid sell-off began). While this 38% rise in the Nifty Future OI with 5.44% rise in the Nifty throughout the august series Indicates extended make-up, possibility of greater volatility must not be ruled out thinking of the important greater Open Interest in the Nifty Futures.
On the other hand, in the Bank Nifty, we have witnessed a reduced rollover of 79% as compared to 81% in the last series. Bank Nifty Futures OI stands at 15.25 lakh shares as against 20.22 lakh shares last series. This fall of 25% in Open Interest with 2.7% rise throughout the August series Indicates quick covering.
FIIs extended to quick ratio in the Index futures enhanced to 1.86 level on expiry day as against 1.78 levels. This ratio of almost two suggests they are net extended (almost 50000 contracts).
We have seen a reduced rollover of 89% in the stock futures segment as against last 3 series typical rollover of 91%. We are beginning the Sept series with stock futures Open interest of 423 crore shares as against 437 Cr shares at which we had begun the August series.
Though Nifty closes at all-time higher, Stock futures open interest stands 3% reduced as compared to last series and 20% reduced than all-time higher Open Interest of 523 crs which was seen in February 2018. This Lower Open in spite of markets are at all time higher indicates markets are not heavy in terms of positions which augurs properly for the markets.
Nifty outlook for September series
Remain bullish and use any correction to accumulate longs
To Sum it up, extended rollover in the Nifty Futures, FIIS Index Future extended to quick ratio above one in the Index futures (They are Net extended), Lower stock Futures’ Open Interest (Markets are not heavy in terms of positions) and Put writing at 16300-16500 levels coupled with the steady Put Call ratio indicates that downside is restricted in the market place and one must continue to stay optimistic for the September series also.
However greater Open Interest in the Nifty Futures (Highest given that Feb-2020 exactly where covid sell off began) recommend that possibility of greater volatility must not be ruled out. Therefore, for traders our guidance would be to stay bullish and use any correction towards 16300-16500 levels to accumulate extended positions with SL of 16100 levels. On the greater side, 16900-17000 levels continue to act as an quick resistance exactly where we have seen get in touch with writing. Amongst the sectors, Oil & Gas, IT, NBFCs and PSU Banks are most likely to do properly in the Sept series.
(Nandish Shah is Senior Derivative & Technical Analyst, HDFC Securities. Views expressed are the author’s personal.)