Nifty Rollover analysis: One should remain cautious. All time high open interest in the stock futures segment indicates higher leveraged positions: HDFC Sec

STOCK FUTURES OPEN INTEREST AT ALL TIME HIGH LEVELS

• Nifty was in decline mode during the August series as it continuously made lower tops and lower bottoms and broke the supports in the process. The Aug series ended with losses of 2.07%. Bank Nifty underperformed in the August series as it lost 3.7%.
• In the Stock futures’ segment, we are starting the September series with an all time high Open interest of 591 Cr shares as against 558 Cr shares at which we had begun August series. This all time high Open interest suggests that markets have become heavy in terms of positions as compared to last few series.
• We are starting the September series with a lower Nifty future OI of 1.06 Cr shares as against last series OI of 1.33 Cr shares. This is 20% lower than last series and also below the last 12 series average OI of 1.13 Cr shares.
• We are starting the September series with a higher Bank Nifty future OI of 25.17 lakh shares as against 20.74 lakh shares in the previous series. While it is higher, it is still lower than last 12 series average OI of 25.95 Iakh shares.
• We have seen slightly lower rollover of 90% in the stock futures segment as compared to the last 3 series average rollover of 92%.
• Rollovers in the Nifty Futures to the September series stood lower at 78% (1.06 Cr shares Vs 1.33 Cr shares) while Rollover in the Bank Nifty Futures was in line with the previous series at 77% (25.17 Vs 20.74 lakh shares).
• Maximum open interest in Nifty Monthly Call options (28 September Expiry) is at 20000 strike (25.28 Lakh shares) followed by 19500 strike (19.48 lakh shares) and maximum open interest in Put options (28 September Expiry) is at 19000 strike (64.17 Lakh shares).
• FIIs’ Long to short ratio In Index Future at the beginning of the September series is at 1.02 Vs 1.41 Last series.

REMAIN CAUTIOUS TILL NIFTY CLOSES ABOVE 19500 LEVELS

IMMEDIATE SUPPORT IS SEEN IN THE VICINITY OF 19200

To Sum it up, all time high open interest in the stock futures segment which in turn indicates higher leveraged positions, Call writing at 19500-20000 levels and FII selling in cash market in August series indicates that one should remain cautious.

Technically, Nifty is in a short term downtrend and has been continuously making lower tops and lower bottoms in the last few weeks. The index has also reacted from the 20 day SMA and is currently trading below the 20 day and 50 day SMA. 14 week RSI oscillator too is in decline mode, suggesting scope for more downsides in the near term.

Amongst the Nifty Options, we have seen aggressive Put writing at 19000 levels, which roughly coincides with previous intermediate highs. This indicates this is a healthy support and Nifty could fall to these supports in the coming sessions.
Therefore our advice would be to remain cautious till Nifty closes above 19500 levels.

BANK NIFTY – REMAIN CAUTIOUS TILL BANK NIFTY CLOSES ABOVE 45000 LEVELS

In the Bank Nifty, where we have seen aggressive call writing at 44500-45000 levels, our advice is to remain cautious till Bank Nifty closes above 45000 levels. On the lower side, 43500 level is likely to act as an immediate support. A close below 43500 could trigger unwinding of long positions which could take the Bank Nifty towards 42700-42500 levels.