ROLLOVER ANALYSIS: REMAIN BULLISH AND USE ANY CORRECTIONS TO ACCUMULATE LONG POSITIONS WITH SL OF 18000: HDFC Sec

SECOND HIGHEST SERIES CLOSE FOR THE NIFTY

• Carrying on from the previous series, Nifty continued to move higher in the May series. There was a minor correction from the high of 18459. But the index recovered from the 20 day SMA and resumed its uptrend. The May series ended with gains of 2.3%. It was the second consecutive series of gains for the Nifty. Bank Nifty underperformed the Nifty in the May series as it gained only 1.6%.

• In the Stock futures’ segment, we are starting the June series with higher Open interest of 490 Cr shares as against 474 Cr shares at which we had begun May series. While the open interest is higher as compared to last series, it is still lower by 6.3% as compared to all-time high Open Interest of 523 crs which was seen in February 2018. This lower OI indicates that markets are light in terms of positions, despite sharp rise in the markets from the March 2023 lows, which augurs well for the market going forward.

• We are starting the June series with higher Nifty future OI of 0.92 Cr shares as against last series OI of 0.90 Cr shares. This OI is however more than half of the last 17-year average OI of 2.08 Cr shares, which again indicates that markets are light in terms of positions.

• We are starting the June series with lower Bank Nifty future OI of 22.4 lakh shares as against 23.77 lakh shares last series. Moreover, It is also lower by 14.5% as compared to last twelve series average open interest of 26.2 lakh shares.

• We have seen in line rollover of 93% in the stock futures segment as compared to the last 3 series average rollover of 93%.

• Rollovers of Nifty and Bank Nifty Futures to the June series were lower at 71% and 78% (92 lakhs/22.4 lakh shares) as against last series rollover of 64% and 82% (90 lakh Cr/23.77 lakh shares) respectively.

• Maximum open interest in Nifty Monthly Call options (29 June Expiry) is at 19000 strike (32.13 Lakh shares) followed by 18500 strike (16.88 lakh shares) and maximum open interest in Put options (29 June Expiry) is at 18000 strike (43.4 Lakh shares).

• FIIs’ Long to short ratio In Index Future at the beginning of the June series is at 1.36 Vs 0.7 Last series.

IMMEDIATE RESISTANCE IS SEEN IN THE VICINITY OF 18400-18500 LEVELS

To Sum it up, higher open Interest in the Nifty Futures’ as compared to last series (long rollover), Lower stock Futures’ Open Interest (compared to all time highs) despite sharp rise in the Nifty from March 2023 lows, FIIS long to short ratio in the Index Futures at 1.36 (Long build up by FIIS in the Index Futures segment) and aggressive Put writing at 18000 levels indicates that downside is limited in the Nifty and one should continue to remain optimistic for the June series.

Technically, Nifty has been consistently moving higher in the last few weeks and making higher tops and higher bottoms after touching an intermediate low of 16828 in March 2023. Nifty continues to hold above the 20 day SMA and momentum indicators like the 14-week RSI are rising and not overbought.

On the higher side, 18400-18500 is likely to act as an immediate resistance where calls have been written. A move above 18500 could trigger short covering with fresh long build up which could take the Nifty towards all time high levels of 18900 and beyond. Crucial supports to watch for a reversal are at 18060.

Hence SL can be placed at 18000.

In the Bank Nifty, our advice is to accumulate long positions on declines with a SL of 42500. On the higher side, 44000-44200 is likely to act as an immediate resistance. A move above 44200 could trigger short covering which could take the Bank Nifty towards 45000 levels.