High rollovers despite weak sentiment

The market witnessed healthy rollovers in the derivatives segment for the near-month November to December contracts on Thursday. This was despite the nervousness in the market on account of a weak rupee and the US Fed hinting at a rate hike in December.

Rollovers in Nifty index futures contracts were at 66% levels, higher than the 3-month average of 62%. Market wide rollovers at 82% were also slightly above the 3-month average.

"Rollovers are in line with 3-month averages. If you look at the way liquidity is shaping up and the way FIIs are rolling over their short positions, there is limited upside in this market," said Siddarth Bhamre, head - derivatives, Angel Broking.

"What's also worrying is that key index heavyweights such as ICICI Bank, Axis Bank, SBI, L&T, TCS and BHEL are not showing strength and the rupee has been depreciating in a sustained manner."

There was a huge formation of short positions in metal stocks, in line with the pressure witnessed by the sector in the last one or two months, said experts.

Nifty started the November series around 8,100 levels. It witnessed selling pressure for most of the series as it tested 7750 on the downside. "The last week of the series witnessed consolidation in the range of 7750-7900 as the put call ratio open interest also fell below 0.80," said Sahaj Agrawal, associate VP - derivatives, Kotak Securities.

On Thursday, Nifty managed to gain over half a% amid volatile trade. Firm global cues helped the index to open in the green and inch up on hopes of seeing Goods and Services Tax (GST) Bill sail through in Parliament. However, upside was capped owing to excessive volatility on the stock specific front. The Nifty volatility index, India VIX, closed at 16.68, up 2.7%.

Market participants expect volatility to remain high in December with resistance seen around 8000-8100 levels. "The overall trend remains negative as we expect selling pressure at higher levels of the index. On the downside, support is seen at 7750 and 7550. One can look at initiating a 7,900 straddle for the December series," said Agrawal.

The key events to watch out for next month would be the meeting of the Federal Reserve as well as the RBI monetary policy meet. Any consensus on the GST front in the ongoing winter session would be a significant positive, said experts.