Rollovers for Nifty and Bank Nifty stood at 77 per cent and 80 per cent, respectively, versus 66 per cent and 65 per cent in the previous month. Market-wide rolls stood at 91 per cent versus 85 per cent in the previous month while strong traction is seen on midcap stocks.
“June series starts with the index futures long-short ratio of 7.9 times versus 3-month average of 2.8 times at start of a series. We expect Nifty to carry forward the momentum moving above fresh lifetime high levels,” said Navneet Daga, Lead Derivative Analyst, YES Securities.
In May, the rally stretched beyond Nifty stocks as Midcap and Smallcap indices rose 6.2 and 8.8 per cent, respectively, during the series. In the last week, foreign institutional investors covered shorts in index futures as the market started moving higher.
India VIX fell 14.55 per cent during the series from 23.30 to 19.91. Lower volatility with a higher market base indicates that bulls are likely to keep their tight grip on the market, said Chandan Taparia, Derivative & Technical Analyst, Motilal Oswal.
Sector-wise, in the banking segment there was strong long buildup on
while short covering was seen in . In the metal block, large quantum of unwinding were seen in and Hindalco with aggregate base shrinking 10 per cent each.
Analysts have trimmed down expectations from metal counters. Credit Suisse and JP Morgan downgraded many stocks from the sector as they believe steel prices have peaked now, resulting in limited upside for investors.
Huge carry forward of long positions was seen on large and midcap names, reflecting in expectation of more upside in them. Traders also added significant long positions in
and Infosys.
“On the options front, maximum Put OI was at strike 14,000 followed by 14,500 while maximum Call OI was at strike 16,000 followed by 15,800. Call writing was seen at 15,300 and 15,800 while Put writing was seen at 15,000 then 14,700. Options data suggests a trading range between 15,000 and 15,800 levels,” said Taparia.
“Higher rollover compared with the last 3-month average, rising Put-Call Ratio and falling volatility indicate that the bulls are likely to hold command to take the indices on new lifetime high zone,” he added.
Trading strategy
According to Daga, for the weekly series starting June 3, traders should adopt Call Ratio Spread strategy on Nifty in three legs. “Buy Call at strike 15,300 and sell two lots of strike 15,500 with outflow of 25 points. Traders should target 100-150 points on that spread. On Nifty futures, stop loss should be at 15,700,” he said.
