F&O Outlook: Uncertainty prevails ahead of Budget

The February series expired in a Doji pattern indicating uncertainty among the F&O participants ahead of the Union budget. The SGX Nifty was trading marginally below the day’s closing level on the OTC platform of the Singapore exchange which indicate steady to weak opening for the domestic market.

However, the market may not react sharply over the budget proposals as most F&O participants have not rolled over their short positions as yet. The rollovers in the Nifty March futures were lower by over 7 million shares compared to rollovers in the February series as participants have allowed their positions to expire and are waiting for the budget to build-up fresh positions.

The Bloomberg data suggest that the traders were indecisive on budget proposals as they were seen booking profit in the March futures above the 4,860 levels and also below the 4,840 levels. The change of hands in the March futures was seen at around 4,851, mostly through buy-side trades indicating build-up blend of short as well as long positions.

However, the poor rollovers in the Nifty and many key stocks futures suggest moderate selling pressure if budget proposals were unfavorable. The Nifty has been trading in the range of 50 odd points for almost two weeks which suggest that bears have not rolled over short positions.

The market in the past has shown considerably upside whenever rollovers in the Nifty futures drop around 21 million shares. So, there is possibility of sharp upswing on market friendly budget and modest correction in the case of budget proposals are unfavorable to corporate sector. 

The options traders expect the Nifty to move between 4,700-4,900 levels and to maintain support at 4,800 levels. The strong resistance is seen above the 4,900 level as traders were selling the 4,900 and 5,000 strikes calls. The 5,100 call options witnessed buy-side trades mostly to hedge of short positions in the Nifty futures.