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F&O Outlook: Nifty not out of the woods, but pullback to 16500 not ruled out, support in 16000-15900 range

For the coming series, the formation of fresh positions in the next few days is likely to dictate market direction.

Futures & Options
India VIX surpassed 25 levels a couple of days ago, but has again declined to 22 and is in a comfortable zone. (Image: REUTERS)

By Ruchit Jain

The May series was divided into two parts wherein Nifty corrected sharply to almost retest the March lows of 15700, while the index then consolidated within a broad range in the latter part of the series. With modest recovery from the lows at the end, Nifty ended a tad below 16200 with a loss of over 6 per cent compared to the last expiry. During the May series, we witnessed aggressive short formations during the first couple of weeks, while the pullbacks in the latter half witnessed some short covering. Although the retail participation in the derivatives segment has increased substantially in recent times; FIIs were in the driver’s seat as they started the May series with short positions and maintained bearish positions throughout the series.

Now, if we look at rollovers, in Nifty they are at 79% while rollover in Bank Nifty stands at 85%. Rollover figures indicate that some shorts are still intact and have been rolled to the June series. If we look at FII’s positions, their ‘Long Short Ratio’ is around 45 per cent which went to as low as 18 per cent during the May series. Their positions indicate that they have rolled more short positions, but the quantum has reduced. On the other hand, the retail clients have started June series with 53 per cent long positions. Before expiry, they consistently had about 60 per cent long positions which indicates that they have reduced some longs.

Now for the coming series, the formation of fresh positions in the next few days is likely to dictate market direction. India VIX surpassed 25 levels a couple of days ago, but has again declined to 22 and is in a comfortable zone. In the options segment, 17000 call and 16000 put options have the highest open interest in the coming weekly series. In the nearby call options, 16500 has seen some open interest addition and thus, 16000 and 16500 are likely to be important levels. 

The data indicates that we are not out of woods yet, but the index can see some pullback at the start of the new series. On pullback moves, 16500 will be the important level to watch out for. Traders can look to trade for a pullback move; but once the market reaches the resistance zone, one should then look to lighten up. On the flipside, 16000 -15900 will be seen as immediate support below which, the recent swing low of 15700 will be the sacrosanct support.

(Ruchit Jain is the Lead Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)

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