Weak rollovers are a concern

F&O OUTLOOK

The cues are not very encouraging ahead of the August derivatives series expiry. The indices have closed in the red for two weeks in a row and there has been a rebound in crude oil prices.

The FIIs net sold Rs 2,423 crore in the cash segment and took short positions in stock futures last week. The derivatives segment witnessed average volumes of Rs 43,000 crore compared to Rs 55,500 crore during the same time last month.

The rollovers have been weak, with foreign investors opting to reduce their exposure in the derivatives space. The cumulative positions held by the FIIs as a percentage of the total gross market positions in the derivative segment declined by over Rs 6,000 crore compared to the same time last month. The FIIs have pruned their exposure to index futures by almost 200,000 contracts and stock futures by 75,000 contracts during the month.

Although the August series expiry is only four days away, the Nifty rollovers stand at a mere 5.98 million shares compared to 9.50 million shares at the same time last month. Index heavyweights such as Bharti Airtel, ICICI Bank, Reliance Industries and Reliance Petroleum have reported a sharp decline in rollovers.

There have been rollovers in 4,400-4800 call options and therefore the index could face a stiff resistance above 4,400. The rollovers of put options at the 4100-4300 strikes indicate support at these levels. A technical analyst at Ambit Capital expects a marginal bounceback as the momentum indicators are oversold. The Nifty is likely to consolidate during the week, with support at 4250 and resistance at 4440.