By Ruchit Jain
The November series proved to be far-fetched for traders as we witnessed a significant rally in the indices with Sensex touching all-time high and Nifty just a few points away from the milestone. This series started with long positions and we witnessed fresh long formations in the first half of the series. The index consolidated in a range during the later part but the long positions were intact and the index did not break its important supports. Ultimately, the Nifty gave a breakout from this consolidation on the expiry day and it rallied higher to end at below 18500, posting gains of over 4 percent compared to last series close.
Now, our markets are near to all-time highs and we have seen high premiums for the December series. This indicates that traders are optimistic for the coming series and have rolled over positions even at higher cost. The rollover in Nifty is at 82 percent compared to its 3-month average of 79 percent while that in BankNifty is at 88 percent v/s average of 82 percent. We had seen long formations in the November series and high rollovers indicate that traders have rolled the bullish bets to the December series.
If we look at FII Figures, they too have been optimistic throughout the series and they have rolled over long positions to the new series. Their ‘Long Short Ratio’ in the index futures segment at the start of new series is at 76 percent which is a positive sign. On the flipside, the ratio for the Client section stands around 50 percent. In the options segment, the call writers had to cover their positions on the expiry day as the index rallied sharply in the end. For the coming week, option writers have added decent positions in 18300 put options indicating that it would be the immediate support level.
The above data is optimistic and hints at continuation of the ongoing uptrend. The important support in Nifty for the near term will be seen around the 18100-18150 range while immediate resistance is seen in the range of 18630-18700. However, since the broader market has not participated aggressively in this uptrend, one should be very specific in picking stocks for trading. We advise that traders should avoid bottom fishing in the underperforming names and rather look to trade in sectors/stocks which have been leading this upmove.
(Ruchit Jain is the lead research at 5paisa.com. The views expressed are author’s own.)