F&O: August series worst in two years on China woes

The India VIX, a measure of market's expectation of near term volatility, surged to 15-month high to 35.57

Indian stock futures also took a hit post the global mayhem on worries that economic slowdown in China would hurt global growth. Further, the devaluation of its yuan also impacted the Indian rupee which fell to its lowest level in the August F&O series. Further, foreign institutional investors which have been huge sellers in the cash and derivative segments also dampened sentiment during the August series.

The August 2015 series was the worst performing in the last two years since August 2013 with Nifty dropping 473 points and the Sensex losing 1,474 points in the cash segment.

Nifty August futures finally settled below 8000 with the series loss of 5.60%. In this series it has breached support levels of 8320 and 7940 and dropped to 7665 levels. It recovered well on the last day of the series led by short covering in all beaten down heavyweights stocks.

"Nifty has seen Rollover of around 67% as per provisional data which is in line to the past six months average. We have seen fresh short position in the August series and shorts are intact and rolled to next series which may again give hurdle to the market at higher levels," says Chandan Taparia, Derivatives Analyst- Equity Research, Anand Rathi.
 
The August series also witnessed a sharp volatility in tandem with global stocks with India VIX surging to 15-month highs early this week causing panic in the market but cooled in the previous few sessions.

Metal stocks witnessed the biggest plunge rising concerns that demand from China. the world's largest consumer, would continue to remain subdued on the back of sluggish economic growth in the world's second largest economy. The CNX Metal index slumped 14% in the August series.

Oil and gas stocks also witnessed selling pressure tracking sharp decline in crude oil prices on fears of weak demand while Iran's plan to pump more oil also kept pressure on global crude oil prices. The CNX Energy index was down 12.4% during the August series.

Meanwhile, the Nifty Sep series was quoting at 7,991.95 which is a premium of 43 compared to the Nifty close of 7,948.95 in the cash market.

Outlook

The Nifty has now to cross and hold above 7950-8000 levels to get a relief rally and bounce back move towards 8181 and 8320 levels. While on the downside if it fails to hold 7850 then this bounce may fizzle out and weakness may continue in the market towards recent low of 7665 and 7500 levels.

Bank Nifty has seen recovery from lower levels but should hold on to 17250-17500 levels to negate immediate negative trend and bounce back towards 18000-18250 levels while on the downside support seen at 16850-16650 zones.