F&O data implies wider trading range

July derivatives series began on negative note as Nifty and Bank Nifty suffered selling pressure. Short buildup was witnessed in Nifty as price eased by 0.75 per cent, while Open Interest was up 1.45 per cent.

Bank Nifty recorded long unwinding as price and OI down by 0.34 per cent and 2.94 per cent respectively. June derivatives series fell 0.9 per cent as against the positive streak in the previous three series.

Nifty futures rollover was at 80 per cent, higher than average rollover 73 per cent in the last three months, while all the market-wide rollovers were at 88 per cent.

Despite weak optimism, futures and options (F&O) traders carried forward their bets to July derivatives series. Adding to this, rollovers are high ahead of Union Budget, which is scheduled on July 5.

The Open Interest (OI) of 1.9 crore shares in Nifty was Rs22,800 crore as against Rs22,900 cr of OI on expiry day of May. Rollover cost was lower than previous series as the market is in wait and watch mode, said derivatives analysts.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Long rollover to July series was seen in the week gone by.

Average rollover price is in the range of 11,800 to 11,850 levels. Smart recovery was seen led by short covering from lower levels. Calls writers covered their short positions and Put writers were actively selling puts.

Maximum Put Open Interest buildup of more than 20 lakh shares is at 11,700, which should act as strong support zone. Option Put writers were active in recent rally. We have seen Put writing in 11,600, 11,700 puts."

Maximum Put OI of 24.25 lakh contracts is at 12,000 strike followed by 11,900 and 11,800 strikes, while highest OI addition was seen at 11,900 strike.

Coming to Put side, 11,700 strike has highest OI of 13.21 lakh contracts followed by 11,800 and 11,500 strikes. Highest Put OI addition was seen at 11,500 strike. Options data indicates a wider trading range of 11,650-12,250 levels.

Bisht further elaborates, "among Nifty Call options, the 11,900-strike (current week and expiry week) call has the highest Open Interest of more than 30 lakh shares, and in Put side, 11,700-strike (current week and expiry week) put has the highest Open Interest of over 20 lakh shares in Open Interest respectively.

The PCR OI for the week closed up at 1.44 which indicates OTM put writing." The aggregate market OI remained low due to stock exiting F&O segment.

From July F&O series, 117 scrips out of 162 derivatives stocks will be shifted to the physical settlement. The rollover percentage in stock futures will also go up by October series, in which all stock derivatives will be physically settled.

"From July series onwards, 34 stocks are excluded from F&O segment and now there are 162 stocks are available in F&O segment for trading," adds Bisht.

BSE Sensex closed the week at 39,394.64 points, a net gain of 200.15 points or 0.51 per cent, as against 39,194.49 points. Registering a marginal rise of 64.75 points or 0.16 per cent, NSE Nifty ended the week at 11,788.85 points as against previous week's close of 11,724.10 points.

"On the technical front 11,700-11,750 spot level is strong support zone and current trend is likely to continue towards 11,850-11,900 levels.

Next week, Nifty is most likely to trade in the range of 11,700 to 11,900 with positive bias. Nifty has multiple strong supports at lower levels. Various supports are 11,700 and 11,650 spot levels," forecasts Bisht.

Nifty futures closed on negative note with a loss of 0.55 per cent at 11,843 level. Long positions buildup was seen in Canara Bank, Union Bank, IDBI Bank and ICICIPrudential, etc.

Nifty futures are starting the July series with close to 19 million shares, which is relatively low open interest. Further long additions in the index can take it higher in coming sessions.

"The Implied Volatility of Calls closed at 13.87 per cent, while that for Put options closed at 13 per cent. The Nifty VIX for the week closed at 14.65 per cent and is expected to remain sideways.

In stock futures, we have witnessed highest rollover in UBL, MFSL, CenturyTex, Siemens and BalkrisInd, while lowest rollover seen in BharatFin, TCS, NIIT Tech, Lupin and TataGlobal.

Sector specific higher side rollover has been seen in metal, auto and FMCG, while refineries, tyre, oil and IT sectors observed least rollovers," remarked Bisht.

Bank Nifty

After remaining choppy for most of the June series, Bank Nifty recorded a sharp pullback during the expiry week. Bank Nifty added 476.85 points or 1.53 per cent during the week as the NSE banking index concluded the week at 31,105.20 points as against 30,628.35 points.