The rollover percentage in Nifty futures August series increased to 84% from an average 78% in the past three series suggesting that market participants expect a further fall.
Rajesh Palviya, head of technical research at Axis Securities said that in the August there was a build-up of short positions and they have been rolled over. He also noted that more short positions have been added.
Rollover data signals bearish market outlook
A report by Nuvama Alternative & Quantitative Research said Nifty futures will start the September series at higher open interest base worth Rs 41,400 crore compared to Rs 40,800 crore seen at the start of August series. A Yes Securities report said, “Despite index weakness, India VIX hovered near 52-week lows, underscoring complacency or lack of aggressive downside hedging.”
Bloomberg data shows that the long-short ratio of FPIs in index futures have fallen to 8% at August monthly expiry day from 10% in the monthly expiry ended July 31.
Palviya expects the Nifty to remain between 24,000-25,000 for the next two weeks. He noted 24,800 is crucial as aggravated short positions are seen adding around that level. On Friday, the Nifty closed 0.3% lower at 24,426.85 and the September futures contract of Nifty 50 closed at 24,650 level.
In the August series ended Thursday, Nifty 50 slipped 1%, the mid-cap index was down 2.4% and the small-cap index closed lower by 3.7%.
Sectoral trends and future market expectations
He also expects the seasonality factor to play out in September. According to the Nuvama report, September has historically been a softer month for Indian equities, with the Nifty closing lower in nearly 60% of instances over the past decade, delivering average returns of -0.4%. “Nifty Bank has also displayed choppiness, with outcomes broadly balanced and returns of -1.2%,” it said “The current setup suggests caution, with markets likely to remain range-bound, offering opportunities to both bulls and bears.”
Sector wise, it said on the long side, meaningful OI addition of Rs 37,100 crore is seen in auto, Rs 9,400 crore in consumption, and Rs 6,800 crore in consumer durables. While short OI has been added in media, infra and banks.
Palviya is positive on auto, chemicals, cement, and new age tech companies based on the data.