Comment

The expiry week resulted in volatility increasing with rising volumes. The rollovers this time were better than the last 2-3 expiries, with rollover cost remaining almost the same at 40-45 basis points. As the markets are near yearly highs with rise in open interest, lower roll cost indicates neutral bias. The direction from current levels will be determined mainly by fresh build-up bias and global cues.

Last week saw Nifty inching up to 4650 after consolidating in the 4450-4550 band. Trading was quite volatile, indicating traders’s indecisiveness. But the close on Friday was very strong and may help maintain the uptrend.

Open interest kept moving up and post expiry, Friday saw an addition of around 8 lakh Nifty. The premium was marginal for Nifty futures, indicating hesitancy of traders to take long bets considering the weekend. In the options segment, activity was hectic in 4700 and 4800 calls and 4400, 4500 puts.

Hedging activity in 4500 put has picked up, indicating immediate support around 4500 levels. On the higher side, once 4700 is knocked out, the market may head for 5000. The move, if it comes, is likely to be sharp considering the long consolidation in the 4400-4550 band.

Global markets are outperforming domestic markets, with the US up almost 11% in July as against 7-8% for our own. Issuance of IPOs has picked up globally, indicating rising investor appetite and declining risk aversion. Domestically, this helped the mid-cap segment where activity picked up last week. I expect mid-cap momentum stocks to attract trader interest as the large-cap rally takes a breather.

The rolls have been good in metals, cement, realty, IT and banking. These sectors are likely to remain active with an upward bias. India Cement, HDIL, India Bulls Real Estate, Axis Bank and Kotak may attract the fancy of long traders. Large-caps like SBI, ICICI, ACC and DLF may inch up, but may consolidate at higher levels.

Power and infrastructure are likely to witness fresh build-ups on long side considering the strength shown by them, coupled with good rolls. The NHPC IPO may keep interest at higher levels in PSU power stocks such as NTPC, Power Grid and PFC besides private peers such as JP Hydro and Suzlon. In infrastructure, Nagarjuna Cons, Reliance Infra and others may witness fresh interest as government programmes get announced and market interest picks up.

Reliance has been witnessing very subdued interest in the last couple of weeks, but good rolls and positive cost of carry may result in the stock inching up sharply this week. The underperformance relative to market may also help the stock. RCom and Idea are witnessing good build-ups and may attract fresh interest, but consolidation is still likely to continue.

L&T, Bhel and Siemens are likely to witness fresh build-up on long side as the cost of carry was seen rising on Friday. GMR Infra, after a long time, has turned into premium in futures, indicating the short bias is declining and may come out of the consolidation range of 140-145 as the stock is an underperformer and may witness long interest, taking it higher.

Nifty is likely to make an attempt to go past 4700 and may head even higher if underperforming pivotals such as Reliance, ICICI and Bhel move up on fresh interest.

The writer is head, derivatives and strategy,PINC Research