F&O Manual | Indices trade with persistent weakness, Nifty to expire in 21,330-21,470 range

The Indian benchmarks traded in negative territory in a volatile market on the expiry day. Experts forecast that the weakness will persist for now, and the ‘sell on rise’ should be the strategy for investors. The expected expiry for Nifty is in the range of 21,330 to 21,470, while for Bank Nifty, it implies a range of 45,450 to 44,650.

As of 9:48am, the Sensex was down 248.63 points or 0.35 percent at 70,811.68, and the Nifty was down 56.60 points or 0.26 percent at 21,397.40.

Nifty

“Nifty-specific FII activity showed buying in Nifty futures amounting to Rs 576 crore and selling in Index Options Rs 7028 crore. Also, significant longs built in stock futures indicate a positive outlook for the day on FII flows front. For today’s expiry, the highest call writing open interest (OI) is positioned only at 21,700 CE with 2.12 lakh contracts. No major call writing is seen in near strikes of 21,500 and 21,600. PE writing picked up in the second half of the day. On the puts side, OI is distributed almost equally at the strikes of 21200/21300/21400,” noted Avani Bhatt, senior vice-president of derivative research at JM Financial.

“Distribution is seen at higher levels around 21,750-21,800. Up-moves close to these levels should be used to book profits/lighten leveraged positions/build hedges. Only on a decisive close above 21850, Nifty will be out of the woods in the short term. Until then, the probability of another round of sell-off and a probability of correction up to 20900-21000 prevails.”

Sudeep Shah, Head of Derivative and Technical Research at SBI Securities, said that t hough the Nifty touched the 21,450 levels, it is not sustaining above that zone. “Expiry is likely to be in the range 21,330 to 21,470.”

Rollover data

“The cumulative futures open interest for the index surged by 2.60 percent for the day while the price was up 1.39 percent, indicating long buildup in Nifty. Also, T -1 Roll-Overs in Nifty have been above average at 65 percent, while Nifty PCR for the current monthly expiry is currently at the 0.81 level,” Shah said.

Soni Patnaik, assistant vice-president of derivatives research at JM Financial, highlighted the rollover data:

– Outlook Positive for indices and futures and options stocks (heavy buying figures stock futures). LSR improved to 48 percent: 52 percent (as expected 45 percent longs is acting as support). VIX at 14.38.

– Nifty rollovers at 65 percent with 0.6 roll cost versus 65 percent last month

– BN rollovers at 57 percent with 0.9 roll cost versus 62 percent last month

– Rollovers have seen a drastic improvement compared to the previous two days

– Higher rollovers seen in banking (77 percent), cement (78 percent), finance (77 percent) and pharma (75 percent)

– Stock-specific higher rollovers seen in JK Cement (92 percent), Indus Tower (89 percent), Glenmark (88 percent), SBI Card (88 percent), Zydus Life (81 percent), MFSL (86 percent), Jindal Steel (88 percent), Canara Bank (84 percent), ICICI General Insurance (83 percent), AU Bank (84 percent)

Bank Nifty

“Bank Nifty’s PCR is currently weaker at 0.58. Significant Open Interest buildup is witnessed in 45,200-45,300 calls and 45,000-44,900 puts, implying a range of 45,450 and 44,650 for the coming few sessions,” said Shah.

“Bank has been playing a spoilt sport. Rollovers on D-1 day are at 57 percent – a tad lower than its three-month average rolls of 62 percent. It is crucial for Bank Nifty to contribute positively for the overall health of the markets. PSU banking stocks can come to rescue. Immediate resistance is at 45,300 followed by 45,550-45,600. Supports at 44,700/44,400. Only on a close above 47,000 will Bank Nifty be out of the woods for the short term, so there’s a lot of room to catch up for Bank Nifty,” said Bhatt.

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