Aggressive rollover suggests Nifty will likely reach close to 19,000 in December expiry

Even as Nifty started the new series on a lukewarm note, technical analysts are estimating the index will inch closer to 19,000 level by the end of the series, and in the process climb to a new peak.

The Nifty and Nifty Bank have seen aggressive long rollovers from previous series to December series. This means traders who were bullish earlier have maintained their stance, rolling over their positions in the next month contract as well.

Rollovers for Nifty and Nifty Bank stood at 82 percent and 88 percent versus 76 percent and 82 percent, respectively, in the prior month. Foreign institutional investors (FIIs) remained net buyers on index futures but trimmed their stocks’ futures positions.

“Going into December series, we will stick to our bullish stance…eyeing all-time highs. Our Nifty target for December series will be 18,900 with key support placed at 18,100,” said Sriram Velayudhan, an analyst at IIFL Securities.

The trend of the last 20 years for the month of December also shows Nifty having 80 percent probability of closing in the green. In this study period, out of all the months, December has also given the highest average monthly gains of about 3.2 percent.

Nifty is currently trading close to its all time high levels of 18,604. Since Sensex has hit a fresh high, Nifty will also likely do the same, analysts have said. The index has rallied about 10 percent from September lows, however, only 18 of Nifty50 stocks have managed to beat Nifty returns. This skewed performance of constituents is reflective of an extremely stock?specific participation in the current rally.

Read: Sensex @ all-time high: Index may appear relatively cheap, but for how long?

“Nifty is likely to complete its pending up moves and consolidate at the upper band provided support at 18,200 is decisively held,” said Amit Trivedi, Senior Derivative Analyst, Yes Securities.

Sectoral positioning

On the sector front, metals and IT were standout performers in November. Relatively pharma, auto, and realty underperformed. Sectoral-wise positioning has been mixed with some seeing aggressive rollover, creating a bullish environment while others saw no rise in rollovers.

“At the start of December series, open interest (value) has become heavier in banking & financials led by long build-up,” said Velayudhan. “OI base in metals and IT is lighter. IT we believe will be an interesting space to watch out for in the December series as a light OI base will provide ammunition for the stocks to fire up.”

Media sector witnessed higher rollover with short build-up in Zee Entertainment and long unwinding in Sun TV – two of the largest media companies. This trend is suggestive of under?performance and limited upside potential.

Auto index constituents like Eicher Motors ended lower with higher rollover and OI addition. Hence, major upside is unlikely as the recent under?performance is likely to continue, Trivedi pointed out. In the cement space, JK Cement and Dalmia Cement rallied over 10 percent with rollover of more than 90 percent. This may be a good buying opportunity, Trivedi said.

Meanwhile, textile stocks witnessed a short build?up.

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