The jitters seen in November prompted market participants to liquidate their positions. Rollover in Nifty both in terms of percentage and open interest (OI) slipped below averages. OI is the total number of outstanding contracts that are held by market participants at the end of the day.
In the case of Bank Nifty, rollover in percentage terms fell to 61.49% in November, the lowest since the July series of 2015—the lowest in 17 series. A rollover refers to carrying forward a position, either long or short, to the next series. However, Bank Nifty OI surged.
“Aggregate Bank Nifty OI increased from 45,000 contracts on 8 November to 78,000 contracts on 22 November, against an average pre-expiry open interest of 55,000 contracts in the last three months. Hence, the apparently low rollover proportion can be attributed in large part to the elevated open interest position. The post rollover aggregate open interest of 57,000 contracts is largely in line with previous months,” said S. Hariharan, head of sales trading at Emkay Global Financial Services Ltd.
Private banking heavyweights were instrumental in dragging down the November series. Even now, stocks such as ICICI Bank Ltd and State Bank of India are seeing a meaningful amount of short positions being added.
“Most of the positions formed were on the short side and are still intact. Thus, Bank Nifty may underperform the market unless we see any meaningful short covering from stronger hands,” said Sneha Seth, equity derivatives analyst at Angel Broking Ltd.
Sharing a similar view, Hemant Natha, an analyst at India Infoline Ltd, added, “Higher share-wise roll with a dip in cost of carry indicates aggressive short rolls. Bank Nifty will face hurdle in between 18,800-19,100 levels, a break above could trigger in sharp short covering.”
The market is now waiting for more clarity on two things—first, what the actual impact of demonetization will be on the Indian economy and secondly, what kind of policies are framed by the newly elected US president. Apart from that, a key near-term event that would be closely watched is the Reserve Bank of India’s monetary policy decision on 7 December.
“On a technical basis, I am expecting consolidation in the range of 17,800-19,300 with buying advisable on dips. Fundamental developments/announcements will have a significant impact since this is an extremely unique phase we are going through. I would use rallies towards 19,000-19,300 to reduce positions,” said Sahaj Agrawal, deputy vice-president (derivatives) at Kotak Securities Ltd.