Can Nifty50 sustain the 18,300-levels in short term?; F&O data has the answer

  • The Nifty has been under selling pressure at higher levels since the middle of the May series after a strong start to the series.

Dhanya Nagasundaram
First Published26 May 2023, 09:03 AM IST
The Nifty rollover in May, however, was less than the three-month average at about 52.95%, as opposed to the three-month average of 54.17%.
The Nifty rollover in May, however, was less than the three-month average at about 52.95%, as opposed to the three-month average of 54.17%.(PTI)

The Nifty rose for the second consecutive series during the May series, gaining 2.3% since the last expiry. Nifty's rollover rate for June series was 70.6%, compared to 64.1% at last expiry. The Nifty rollover in May, however, was less than the three-month average at about 52.95%, as opposed to the three-month average of 54.17%.

The Nifty has been under selling pressure at higher levels since the middle of the May series after a strong start to the series. Brokerage ICICI Direct Research believes that it is improbable that the Nifty will sustain the 18,300-level after analysing options data.

"Nifty is unlikely to sustain 18,300 levels as aggressive call writing is seen in at the money (ATM) and out of the money (OTM) call strikes with the highest call base being at 18,400 strike. In case the Nifty manages to sustain above 18,320 then a bout of short covering can be seen, though the possibility of such a case is remote," said the brokerage in its report.

From its historical low of 11 in the April series, the India VIX rose to 13 in the May series. Analysts predict that the India VIX may continue to rise from its current levels as worries over the US debt ceiling linger.

In the May series, the Bank Nifty moved favourably and came close to testing its all-time high. The upside of the 43800-44000 Call strike looks limited from an expiry standpoint when looking at the writing volume. If the Bank Nifty is able to hold above 44000, short covering might be observed, said ICICI Direct in its report.

Broader markets saw active buying in the May series and outpaced headline indexes by a respectable margin. Nifty Midcap specifically saw gains of almost 5% compared to the Nifty's 2% return. Auto and FMCG companies stood out among sectoral indices in terms of performance.

This expiry saw a positive trend in the majority of the sectors; the only one to end the expiry with a loss was the healthcare industry, while the auto sector saw the biggest gain, up 7.5% from the prior expiry. Of all the sectors, the auto sector showed the largest gain in open interest since the previous expiry (10.5%), and the consumer staples sector saw the largest decrease (-9.4%).

This expiry, there was a significant increase for a number of IT sector stocks, including Tech Mahindra, Wipro, and Birlasoft. According to the brokerage, these equities will likely move upward as we approach the June expiry period.

"The open interest in Nifty June series is relatively low compared to last month’s OI on T-1 session with near 6.3 million shares vs. 6.6 million shares seen in the last series. Meanwhile, the roll spread is higher compared to last month, as Nifty June futures closed with a premium of almost 81 points. Considering dividend of almost 45 points, roll spread of almost 120 points seems on a higher side, added ICICI Direct in its report.

According to Geojit Financial Services, the highest open interest for the Nifty weekly contract is at 18500 for calls and 18300 for puts, while the highest open interest for the monthly contract is at 19000 for calls and 18000 for puts. In weekly contracts, the highest fresh OI addition was observed at 18300 for calls and 18300 for puts, and in monthly contracts, at 18300 for calls and 18000 for puts. Future index long positions held by FIIs climbed by 0.22%, while future index short positions increased by 3.95%. Index options held by FIIs also increased by 11.53% for Call long positions, 2.25% for Call short positions, 23.03% for Put long positions, and -1.36% for Put short positions.

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First Published:26 May 2023, 09:03 AM IST
HomeMarketsStock MarketsCan Nifty50 sustain the 18,300-levels in short term?; F&O data has the answer

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