By Ruchit Jain
The first half of the June series was completely dominated by the bears as we witnessed formation of short positions in both Nifty as well as Bank Nifty. Nifty corrected from the high of around 16800 to 15200 in just a couple of weeks time where FII’s had formed aggressive short positions. However, in the later half of the June series, we witnessed some short covering which led to some recovery towards 15800 at close.
In the last four sessions, Nifty has consolidated within a narrow range of 15680-15930. The rollovers in Nifty are at 75 percent which are lower than its last 3 month average while that in Bank Nifty is at 87 percent. Lower rollover in Nifty indicates lesser shorts are rolled to the July series. However, if we look at FII’s index futures data, then they have rolled their short positions and at the start of the July series, they now have 21.8k contracts on the long side and over 1.26 lakh contracts on the short side. Thus their Long Short ratio stands under 15 percent.
On the flipside, retail clients have over 64 percent positions on the long side in the index futures. In the coming weekly series, decent open interest concentration is seen in 15800 and 16000 call options while 15700 and 15500 put options too have a good amount of positions outstanding. However, being the start of a new series it would be crucial to see how fresh positions are formed in the next couple of sessions.
The index has recently traded within a narrow range in the last few days wherein 15700-15650 followed by 15500 are seen as immediate supports. On the flipside, a move above 15900 will lead to an up move in the near term towards 16000 and 16200. Till the Nifty is trading above the mentioned supports, we advise traders to avoid forming short positions as of now. One can look to add longs above 15900 in the coming week for probable targets around 16200.
Amongst other sectoral indices, the heavyweights from the Banking and IT sector will take the leadership to drive the markets. Traders can look for stock specific buying opportunities from these sectors from a short term trading perspective.
(Ruchit Jain, Lead Research, 5paisa.com. Views expressed are the author’s own.)