Nifty F&O rollovers flag 'Neutral' bias; IT, telecom positive: Analysts

Nifty rollover to the November series was below its three-month average, and the cost of carry also declined, said Dharmesh Bhatt of Systematix Institutional Research.

Disclaimer: Views and outlook in this report belong to the brokerages and analysts cited. They do not reflect the views of Business Standard. Readers are advised to exercise discretion. The NSE Nifty 50 index ended the October futures & options (F&O) series with a notional gain of 0.15 per cent at 22,750 in spite  of high volatility witnessed during the series. The Nifty hit a low of 22,179, and a high of 23,175 in the October series. Analysts flag that Nifty rollovers were below average, indicating a likely 'Neutral' bias for the index in the November series. "Nifty rollover at 74 per cent remained below its three-month average of 76.3 per cent. Opening open interest (OI) contracted 9 per cent to ₹35,427 crore, while the cost of carry fell to 46.7 bps from 66.2 bps," said Dharmesh Bhatt, Head-Derivatives Research at Systematix Institutional Research in a note. Bhatt reckons that the reduction in OI and carry indicates the October short overhang has eased, but fresh long accumulation has not yet emerged. Going into the November series, the analyst sees key support for Nifty in the 22,200–22,500 range, and resistance around 23,400–23,700 levels. 

 

 

 Anand James, Chief Market Strategist at Geojit Investments says the Nifty either needs to see consistent trades above 22,715 or bargain hunting from the 22,500 region to renew upside hopes. Meanwhile, Nandish Shah, Deputy Vice President at HDFC Securities flags that the foreign institutional investors (FIIs) long-to-short ratio in index futures at the beginning of the November series stood at 0.13 - the highest since the start of the June series- compared with 0.09 at the beginning of the October series. "Short positions accounted for nearly 88 per cent of their total index futures exposure, down from 92 per cent in the previous series, indicating early signs of easing bearish positioning. Despite this moderation, their short exposure remains substantial, leaving room for further short covering that could support a near-term market rebound," said Shah in a note. Check - TOP GAINERS NSE | TOP LOSERS NSE 

Bank Nifty/ sectoral outlook

 Bhatt has a positive stance on the Bank Nifty. "Bank Nifty presents a stronger positional setup. November opening rollover reached 84.14 per cent, the highest in the tracked series, while opening OI remained broadly stable and carry stood at an elevated 68.3 bps. This indicates that a substantial proportion of positions has been carried forward with conviction," says Bhatt. The analyst sees support for Bank Nifty around 53,000–53,500 levels, and resistance on the upside around 56,500–57,000 levels. Among other sectors, Bhatt says the IT sector staged a smart rally driven by an earnings-based reversal. The sector OI declined by 1.5 per cent, suggesting that short covering contributed significantly to the rally. That apart, the telecom sector remains resilient, with Bharti Airtel gaining 11.7 per cent and rollover at 84.9 per cent, above its three-month average, the analyst added. Bhatt, however, flags caution on the metals & mining sector, where stocks declined up to 9.3 per cent, accompanied by OI expansion, indicating continued short buildup.