STOCK FUTURES OPEN INTEREST AT ALL TIME HIGH LEVELS. REMAIN BULLISH WITH TRAILING SL OF 18500: HDFC Sec

ROLLOVER ANALYSIS

STOCK FUTURES OPEN INTEREST AT ALL TIME HIGH LEVELS

• Nifty continued its upward journey in the June series also. There was a minor correction from the high of 18876. But the index recovered from the 20 day EMA and resumed its uptrend. The June series ended with gains of 3.55% to close at all time high levels at 18972. It was the third consecutive series gain for the Nifty. Bank Nifty underperformed the Nifty in the June series as it gained only 1.5%.

• In the Stock futures’ segment, we are starting the July series with all time high Open interest of 526 Cr(Previous high-523 Cr shares at the beginning of Feb 2018 series) shares as against 490 Cr shares at which we had begun June 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 July series with slightly higher Nifty future OI of 1 Cr shares as against last series OI of 0.92 Cr shares. This OI is nearly half of the last 17-year average OI of 2 Cr shares

• We are starting the July series with higher Bank Nifty future OI of 24.26 lakh shares as against 22.40 lakh shares last series. However it is 6% lower than last 12 series average OI of 25.93 Iakh shares.

• We have seen in line rollover of 92% in the stock futures segment as compared to the last 3 series average rollover of 92.6%.

• Rollovers of Nifty and Bank Nifty Futures to the July series stood higher at 76% and 79% (1 Cr/ 24.26 lakh shares) as against last series rollover of 71% and 78% (0.92 Cr/22.4 lakh shares) respectively.

• Maximum open interest in Nifty Monthly Call options (27 July Expiry) is at 19500 strike (26.01 Lakh shares) followed by 19000 strike (24.15 lakh shares) and maximum open interest in Put options (27 July Expiry) is at 18000 strike (26.72 Lakh shares), followed by 18500 strike(26.04 lakh shares)

• FIIs’ Long to short ratio In Index Future at the beginning of the July series is at 1.98 Vs 1.36 Last series. This is the highest long to short ratio since December 2022. In other words out of total positions of FIIS’ in the Index Futures segment, nearly 66% is on the long side.

REMAIN BULLISH WITH TRAILING SL OF 18500

USE ANY RALLY TOWARDS 19200-19500 TO BOOK PROFITS IN LONG POSITIONS

To Sum it up, higher open Interest in the Nifty and Bank Nifty Futures’ as compared to last series (long rollover), FIIS long to short ratio in the Index Futures at 1.98, highest since December 2022 (Long build up by FIIS in the Index Futures segment), FIIS aggressive buying in cash markets and sharp rise in the Nifty Open Interest Put Call ratio on the back of Put writing at 18500-19000 levels indicates that downside is limited in the Nifty

Technically, Nifty has been consistently moving higher in the last few weeks and making higher tops and higher bottoms. Nifty continues to hold above the 20 day EMA and momentum indicators like the 10-week RSI and MFI are showing strength. Therefore our advise would be to remain optimistic for the July series with SL of 18500 levels.

However considering higher stock futures’ positions which in turn indicates higher leveraged positions, Call writing at 19200-19500 levels and sharp rise in the Nifty from March lows during last three series (11% rise), suggests possibility of a running correction should not be ruled out.
Moreover historically Nifty has never risen for four series on the trot since June 2017 and therefore history suggests, there is a higher possibility of profit booking in the July series after three series of consecutive gains. Therefore our advise is to book profits in long positions on any rally towards 19200-19500 levels to re-enter at lower levels.

BANK NIFTY – REMAIN BULLISH WITH SL OF 43500

In the Bank Nifty, which closed at all time high on weekly chart, our advice is to accumulate long positions on declines with a SL of 43500. On the higher side, 44800-45000 is likely to act as an immediate resistance. A move above 45000 could trigger short covering which could take the Bank Nifty towards 46000- 46500 levels