Though in percentage terms the rollovers in Nifty and Bank Nifty indices have been in line with the averages, in absolute open interest perspective rollovers were very less, that is, series on series open interest has reduced in the overall market, especially in index futures.
November to December positions which got rolled over were much higher and mainly on the short side of the trade. From December to January a smaller number of participants or, one may say, lower number of trades have been carried over.
We spoke last week about FII interest in our markets. However, to our surprise, they sold more than `1,000 crore on expiry day in the cash market segment.
Options build-up, though not very high in January series, is throwing a very wide range for the market and open interest is appearing very scattered. If we look at it from a narrow range perspective then 4700 call has substantial build-up while in puts 4500, which has the highest open interest, and 4600 strike are providing some support in the near term; 4500 being the more prominent one. In a wider range, we are seeing 4200 put have significant build-up, and we can gauge from the mood in the market that it’s the buyers who are more active there. Well, if that has scared some then listen to this. 5000 call has highest build- up while 5100 has also seen decent accumulation. Here too, we believe that not all participants have written this. So 4500-4700 is first range for this market, and if it breaches either side and sustains beyond those levels than it may touch the outer limit of respective option build-ups.
The last trading day of 2011 has been very lacklustre and accompanied by very thin volumes. The first few days of 2012 may also see less of activity volumes-wise. However, since most of the participants are non-FIIs and short in market, return of FII action and the direction it will take, becomes a very important observation to watch this week. We believe if they turn buyers and take the market above 4720-4750 range then we may witness sharp short covering rally.
However, the bigger task will be to go above those levels, and the journey above it may be much simpler.
And if they decide to take the market lower, then the environment and outlook will become quite negative, as we believe many bulls will throw in their towel once the market moves below 4500 level, which is considered to be the floor or a very strong support for the market.
The writer is head - equity derivatives, Angel Broking.
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