Rollover data signals potential bounce-back after some more consolidation

Derivatives rollover data from October 26 indicates the potential for a bounce-back after further consolidation, according to market experts. The outlook for the November series suggests that Nifty might gracefully dip to around 18,700 before a tantalizing ascent to 19,100 materializes.

After yesterday’s rout, the benchmark equity indices continued their downward trend for the sixth consecutive session, reflecting the global market sentiment impacted by concerns over US Treasury yields and the ongoing Middle East conflict. The stock markets were also affected by the underwhelming earnings report from Tech Mahindra and the overall performance of the IT sector.

The BSE Sensex traded down by 900 points, dipping below 63,200, while the Nifty50 slipped below 18,900, marking its first drop to this level since June 28. In the beginning, the October series appeared to be one of the calmest, with domestic markets trading within a stable range. However, from October 18 onwards, a sudden surge in volatile price activity triggered relentless selling pressure. This pressure affected not only heavyweight stocks but also market favorites in the small and mid-cap sectors. Nuvama Research stated that “This series will undoubtedly be remembered as one filled with suspense, slight ups, and rapid descents, and a testament to the dynamic nature of equity markets.”

The Nifty Index declined by 3.4 percent, settling at 18,857, and the Nifty Bank was down 4.6 percent, settling at 42,280. Amidst this downward journey, the Midcap Index and Small-cap Index settled with losses of 5 percent and 1.8 percent, respectively.

October series sector-wise performance

In the October series, the sectoral indices that saw the most significant losses were the PSU Bank Index (down 8.7 percent), IT Index (down 5.2 percent), Metals Index (down 4.7 percent), Media Index (down 4.4 percent), Pvt Bank Index (down 4.2 percent), Fin Serv Index (down 3.8 percent), and Pharma Index (down 2.5 percent). The only index that managed to settle in the green was the Realty Index (up 0.3 percent).

Rollovers | Higher Nifty Index Open Interest Base (led by short positioning); Market-wide Open Interest decreases

According to Nuvama Research, “Nifty futures rollovers stood at 83 percent compared to 79 percent in the last three series. Additionally, Nifty futures will start the November series with a higher Open Interest base of Rs 219 billion (approximately 11.6 million shares) compared to the Open Interest of Rs 204 billion (approximately 10.4 million shares) seen at the start of the October series, signifying significant short build-up. On Expiry Day, the roll cost for Nifty was around 50-52 basis points, as compared to the previous day’s 50 basis points. Market-wide futures open interest at the start of the November series stands at approximately Rs 2.710 trillion compared to approximately Rs 2.863 trillion at the start of the October series. Market-wide rollovers are at 92 percent, higher than the 3-month average of 91 percent.

Stock futures rollovers stand at 94 percent, higher than the average rollovers of the last three series at 93 percent. The roll cost for SSF for today was around 63-66 basis points, as compared to yesterday’s 66-70 basis points.

FIIs are selling in cash and taking Index & single stock futures (SSF) shorts; HNIs are increasing long positions

Nuvama Research report stated that in the Index, FIIs are taking short bets and have decreased shorts in SSF marginally. In terms of the Index, their net shorts stood at 152,000 contracts compared to 57,300 short contracts at the start of the October series. This is, in fact, one of the most significant short bets taken at the start of the series. In SSF, their net shorts stood at 136,000 contracts compared to 144,000 net short contracts at the start of the October series. Meanwhile, as per the Nuvama Research report, the Client category (HNI & Retail) has added meaningful longs in the Index and increased their longs in SSF as well. In the Index, their net longs stood at 133,000 contracts compared to 60,300 long contracts at the start of the October series. “Despite a quick fall in the last few days, the confidence of HNIs still remains unshaken to a certain extent,” stated Nuvama.

Rollover action – Sector Specific: At the start of the November series, meaningful Open Interest reduction is seen in oil and gas (Rs 202 billion | Short side), financial services (Rs 220 billion | Short side), FMCG (Rs 143 billion | Short side), and energy (Rs 53 billion | Short side).

Outlook for November series

As per Rajesh Shrivastava, trader, “The rollover data looks good. Indicating the possibility of bounce back after some further consolidation and range bound movement in the market.”

Nuvama Research stated, “As we gaze into the future, a captivating narrative unfolds for heavyweight stocks, ensnared in a broader trading range with a formidable barricade at 19,300 to 19,400. In the intriguing realm of Index, FII’s bold short bets add a thrilling twist. Nifty might gracefully dip to around 18,700 before a tantalizing ascent to 19,100 materializes.”

Top 20 Stocks with highest F&O rollover to November

The above data analyzes the rollover data of the past four months and the build-up in open interest positions in the stocks in the last month.

Dalmia Bharat open interest build-up in the past 4 months

According to the data, among individual stocks, Dalmia Bharat, Dixon, and Polycab have significant open interest positions and rollover to the November series, implying strong momentum in these stocks.

As per Rajesh Shrivastava, trader, “The first stock is Dalmia Bharat, starting the series with the highest ever position built at the start of a new series.”

Dixon Technologies open interest build up in past 4 months

According to the data, among individual stocks, Dalmia Bharat, Dixon, and Polycab have significant open interest positions and rollover to the November series, implying strong momentum in these stocks.

Lastly, scrip Polycab also has a high open interest build-up; however, the stock has been trading lower, according to Rajesh Shrivastava, which indicates a short build-up.

Polycab open interest build up in past 4 months

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