F&O Watch: RBI policy stance not to dictate volatility

After moving in a broad range during the month, amid volatility, the September derivative contracts expired today and the Nifty Oct series was seen at 27-point premium to the spot market. However, market experts believe that RBI policy stance would not dictate volatility going forward but rather the developments in China.

“Nifty traded in a broad range for the entire month of September. It failed to sustain above 8050 on the higher side while on the downside 7600 acted as a strong support. India VIX tested high of 30 before cooling-off to sub 20 levels," said Sahaj Agrawal, Associate Vice President- Derivatives ,Kotak Securities

Rollovers of Nifty future was around 59% from September to October series on a provisional basis.

"Rollovers are comparatively low from averages which indicates that bulls and bears both have not taken their position aggressively as market stuck in a broader range and yet not given any decisive sign of movement on either side even after making a short term bottom near to 7550 zones," said Chandan Taparia, Derivative Analyst, Anand Rathi

Rollovers in the Bank Nifty was around 60% with series closing flat at 17196.65 compare to August close of 17214.40 levels.

Some of the index heavyweights which witnessed rollovers of over 70% include, Reliance Industries (81%), Infosys (74%) and HDFC (78%).

Sectors which witnessed long rollovers include Textile, Pharma, Auto while sectors which witnessed short rollovers include Metal and Cement

In the mid-cap segment, Jublinat Food, Mcleod Russel, M&M Fin, RCom, Century Textiles, Karnataka Bank, Jain Irrigation, Divis Labs, Tata Chemicals and Aurobindo Pharma were among the most active stocks which have seen rollover of more than 84%.

Positive rollovers was also seen in stocks like Lupin, Maruti, TCS, Wipro, Ceat and Ashok Leyland.

The India volatility index, India VIX, hit a high of 30 during the September series to finally ease to 20.88 levels. However, volatility may continue for next few sessions till the RBI policy and is seen cooling later.

Outlook

The markets are likely to rebound in the short-term while post the RBI policy global factors especially the developments in China is likely to add to the volatility.

"We expect the index to witness a bounce back in the near term. 8150-8200 is expected before the index resumes its downtrend. Options concentration is seen at 7800 put and 8200-8300 calls. A sustain below 7800 can invite selling pressure. Selective participation is expected in the current up-move as the undertone remains negative.” Agrawal added.

The Nifty seems to be facing tough resistance above 7,850 levels and selling at higher levels seems to cap upside.

"Now it has to hold above 7850 zone to witness an up move towards its strong supply zone of 8050-8090 mark and holding above the same only would change the immediate negative trend to start a fresh leg of rally in the market. While on the downside immediate support exist at around 7770 and 7665 zones. Participants would keenly watch on the announcement of RBI policy and which may decide the next market trend," Taparia added.