Foreign institutional investors (FIIs) lightened their long calls on the Nifty index for the August series with a net long of 62,000 contracts as against net long of 2.3 lakh contracts at the start of July expiry.
Nifty witnessed some profit taking at higher levels with the rollovers standing at 70% versus 76.25% last month and the three-month average of 72.6%, according to a report by SBI Securities.
In the July series, the monthly expiries for Fin Nifty and Bank Nifty are scheduled for Tuesday and Wednesday. However, as of July 25, the Bank Nifty rollover stands at 62%, according to a report by domestic brokerage firm Nuvama.
Meanwhile the HNI and retail participants covered all index shorts and added longs in SSF. The net longs in index stood at 9,000 contracts vs 2.43 lakh short contracts at the beginning of the July series, while the net longs in SSF stood at 18.75 lakh contracts vs 18.43 lakh net long contracts.
Overall, Client (HNIs) maintained their bullish bets in single stock futures (SSF) and now covered all index shorts. Meanwhile the FII have gone lighter on index longs while adding more long positions in SSF.
Outlook for August series
“The August series is expected to be action-packed, driven by the ongoing earnings season. Our outlook suggests that the bullish momentum will persist, with the index likely settling around a 1% gain. At the sector level, banking and IT may underperform, with exception of HDFCB, which should see interest due to the MSCI weight up update announcement on August 13th (IST). There is notable interest in HDFCB around the 1,550-1,600 level,” said Nuvama in its report.
Considering seasonality, industrials like Polycab, Havells, ABB and Crompton Greaves should be viewed with a long bias. Additionally, Trent, a probable Nifty 50 inclusion, is expected to perform well in the August series (strong Aug seasonality), Nuvama report added.
“On the rollovers front, the second consecutive expiry, we witnessed roll levels coming under pressure despite August being a lengthy expiry (35 days). Burgeoning arbitrage AUM (~INR 2tn) and hedging activity at higher levels is keeping a lid on roll levels,” IIFL Securities mentioned in its report
IIFL Securities also noted that except for auto and telecom, annualised roll levels fell across sectors with metals, financials, FMCG and pharma seeing a drop. Open interest structure in auto, cements, capital goods and pharma is on the heavier side. Financials have seen lightening of OI structure.
Analysts at SBI Securities stated that overall, the average returns for the August Series have been -0.60% for Nifty. Over the past 17 years, August has consistently shown an average volatility of over 7.66 percent for the Nifty index.
“Tracking seasonality, over the past 17 years, the August month has often exhibited a mixed trend for Nifty. On 8 occasions, the index has concluded on a positive note with an average gain of 3.73%, while on 9 occasions, it has ended on a negative note with an average loss of 4.45%,” said analysts at SBI Securities.
Sector-specific rollover action according to Nuvama
Long side
FMCG- Rs 29,400 crore worth of OI additions
Pharma- Rs 22,700 crore worth of OI additions
Oil & Gas- Rs 34,100 crore worth of OI additions
Chemicals- Rs 10,400 crore worth of OI additions
Short side
Banks- Rs 86,000 crore worth of OI additions
Metals- Rs 30,000 crore worth of OI additions
Additionally, historic high OI is seen in Auto (Rs 33,900 crore), Fin Services (Rs 39,700 crore), IT (Rs 34,200 crore), Capital Goods (Rs 28,700bn), Consumption (Rs 10,000 crore) and Consumer Durables (Rs 6,100 crore).
Overall, the stock futures rollovers stand at 93%, at par with average rollovers of the last three series at 93%.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
