Rollovers suggest indecisiveness

F&O OUTLOOK

The market has recouped most of its post-monetary policy review losses, thanks to softening oil prices and short-covering ahead of July futures expiry. The rollover activity during the day, however, suggests indecisiveness on the part of derivatives traders.

The Nifty August rollovers have been lower at 21.60 million shares compared to 29.76 million shares during the same time in the previous month’s contract. However, the rollovers have taken place at a premium compared to the huge discount seen in the July rollovers.

The last day of expiry is likely to be eventful, marked by volatile trading. The low rollovers may trigger short-covering and take the Nifty further up. There were short rollovers on Tuesday and long rollovers on Wednesday, with the August futures ending at a premium over the July futures.

The options activity has been concentrated on the 4200 and 4300 strike prices. The Nifty had a PCR of 0.83 at the 4300 strike price, indicating resistance, while the PCR of 1.96 at 4200 demonstrated support. Based on this, the Nifty should settle between 4200 and 4300.

Since 4200 and 4300 options are in-the-money and at-the-money contracts, their open interest are important pointers on the eve of the July futures contracts expiry.

Interestingly, the 4350 July call options have seen a rise in open interest. A total of 118,350 shares have been added at the strike price of 4350 on the penultimate day of July futures expiry, which goes to suggest that the Nifty may settle around 4350.