By Ruchit Jain
Post three back-to-back negative expiries from April to June, the July series started amidst a pullback move around 15700. The market sentiment was negative as the stronger hands had short positions and the pullback from the lows did not witness broad market participation. However, the index recovered gradually and as the series progressed, the indices witnessed short covering and fresh buying interest as well which lifted the market higher and the Nifty ended the July series above 16900 with gains of over 7 per cent.
The July series witnessed a relief rally as the indices recovered and posted a decent up-move. The Nifty index witnessed short covering as well as long additions while Bank Nifty index outperformed due to long formations. In fact, the Banking index had one of the best series in the last few months and posted gains of almost 12 per cent. The rollover in Nifty is at 75.69 per cent while in Bank Nifty is at 82.28 per cent which is slightly lower than their average.
During the July series, FII’s were short heavy and we witnessed short covering by them during the later part of the series and interestingly they have rolled lesser shorts and more long positions in the index futures to the August series. Their ‘Long Short Ratio’ now stands over 57 per cent which is a positive sign. On the other hand, retail clients who consistently had more long positions have squared off some of the positions and have a long-short ratio below 52 per cent. In the coming weekly series, option writers have built positions in 16800 and 16700 put options indicating support zone. On the higher side, 17000 is the important level above which the index could continue the momentum towards 17300.
As the July series has ended on a positive note, the data remains positive and hence, we expect the momentum to remain intact in the initial part of the August series as well. The Banking index could continue its momentum while the IT space too could see some up move in the near term after a decent underperformance seen recently. Traders are advised to look for buying opportunities until we see any short formations again. On declines, 16800-16700 should be seen as an immediate support zone in the coming week while 17000 will be the crucial level immediately. Above that, the index could rally towards 17300 where traders can then look to lighten up the long positions and take some money off the table.
(Ruchit Jain is the Lead Research at 5paisa.com. Views expressed are the author’s own. Please consult your financial advisor before investing.)