The settlement week opened on an upbeat note and notching up a percent gain. Rollovers trend was pretty strong with open interest additions in December futures higher than those cut from November. As traders closed November positions and open December, the mid-term series traded at significant premium to near-term thus creating a calendar spread arbitrage.
Derivatives volumes were high as foreign institutional investors (FIIs) increased exposure in real terms but their exposure as a percentage of all open interest dropped. High carryover looked pretty guaranteed if rollover picture of the last three days were anything to go by.
About 71%of Nifty futures open interest is in December-January, with December accounting for 25.12 million shares. The Nifty December futures start the series with a 13 point discount as rollover stood at 70%on Thursday, lower than 75% seen in the last series.
The overall put-call ratio in Nifty options is 1.46 (in terms of open interest) and 1.34 in December. This is due to a combination of put build up and calls profit booking. While a high PCR is bullish in theory, a very high PCR may not lead to breakout. In the recent past, the market has range-traded at this sort of high PCR.
Option chains show open interest clusters across both December and January. In the put chain, the highest consolidated open interest is at 5,000p with 3.40 million shares and then 4,800p and 4,500p (31). In the call chain, the highest consolidated open interest is at 5,100c with a fair amount at 5,200c. Going by this, December is unlikely to witness exaggerated movements on either ends. A break beyond 4,800 or 5,180 would lead to a sharp move if it occurs in December.
Market wide rollover was 85%with good rollovers seen in FMCG & cements space while metals, telecom were laggards as far as rollovers were concerned.
The writer is a derivatives analyst