Fresh open interest build-up from current level will dictate the further move in the index, says Jay Purohit of Centrum Broking
The June series started with lighter open positions and rallied in the first fortnight along with fresh long build-up. The Nifty failed to sustain above its crucial hurdle of 10,850–10,900 and started correcting.
The fall seen in the last two weeks was supported by a large number of short positions. Low rollover (64.05 percent), both in term of open interest (-2.16 percent month-on-month) as well as in percentage term s(quarterly average is 67.89 percent), indicates that most positions formed in June series didn’t get carried over to the July series.
Fresh open interest build-up from current levels will dictate a further move in the index. In the month gone by, foreign institutional investors added a large amount of fresh short positions in index futures. As a result, the long-short ratio reached 35 percent from 44.20 percent at the start of the series.
FIIs sold equities worth Rs 10,092 crore in the June series, which doesn’t bode well for the markets. On the options front, 11,000 call and 10,600 put followed by 10,500 put is seeing investor attention in the July series.
The Bank Nifty started the June expiry with a large amount of long positions. But the bulls failed to capitalise on that. As a result, the banking index remained sideways for major part of the June series.
We didn’t witness any meaningful open interest addition in the entire series. Rollover in the Bank Nifty (71.79 percent) was below its quarterly average of 77.62 percent. It is also lower in term of open interest, as we witnessed unwinding of 31.88 percent positions in the June series as compared to the May series.
The rollover data clearly indicates that most long positions, which got carried forward from the May series, are now out of the system. However, some of the long positions formed at lower levels in April are still intact in the system.
Among stocks, Dr Reddy’s Laboratories, Bajaj Finance, Bata India and Reliance Industries were among the few counters which added a large amount of long positions and the same got rolled to the July series.
Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
While a good amount of shorts got rolled in the stocks like NCC, NBCC, SREI Infra, Dalmia Bharat, Ashok Leyland, Bank of Baroda, MRPL, REC, Sun TV etc. among others.
Disclaimer: The author is Technical & Derivatives Analyst at Centrum Broking Limited. The views and investment tips expressed by the investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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