Strong rolls in power, IT, FMCG stocks

The last week of the November futures and options series saw markets trade amidst high volatility. The tight range for the closing suggested a strong tussle between bulls and bears. Another factor that suggested this was the rollovers — though the rollovers per se were better than the previous expiry, the cost was lower.

Also, that it was around the 5100-5150 levels, which last saw hedging activity during the October series, kept market players cautious. The option volatility was low and hence a tight trading range for the Nifty.

The settlement day saw Nifty trading with higher volatility and fresh short build-ups in the December series as fears over Dubai’s debt problems loomed over the other financial markets. The benchmark Nifty fell over 100 points on the day of November expiry to close around the 5000 mark.

This was followed by huge selling activity on Friday on the back of sell-off across global indices, leading to Nifty hitting a low of 4806. However, recovery in European markets and the Dow Jones Futures resulted in short covering, helping Nifty close at 4941, down just over 60 points for the day. 

If we talk about the rollover data, the rolls were strong in sectors like power, IT and FMCG. Cement stocks, which had witnessed huge short build-ups in the November series, saw short covering, resulting in gains. Even auto majors such as Hero Honda, M&M and Maruti witnessed most of the positions getting rolled. I believe the bias for these stocks will continue to remain positive in the medium to longer term. The level of 5100-5150 would remain crucial for the Nifty as the index has not been able to break out despite sustained attempts.

Meanwhile, call writing has intensified, suggesting a strong resistance at that level. On the downside, 4700 and 4800 puts saw writing activity, thereby indicating support at those levels. This suggests a trading zone of 4700 to 5100 for the Nifty in the near term.
In this phase, markets could witness churning as less fancied counters grab investors’ attention.

Stocks like Hind Unilever, Dabur and ITC, which showed good strength last week, have witnessed strong rolls and the trend is likely to be positive for them. Realty major Unitech, which saw huge build-ups along with higher delivery based volumes on Friday from 72 to 80, could spring a surprise in the next fortnight or so. This could result in the sentiments turning positive for other realty stocks.

In banking , SBI and ICICI Bank could outperform the markets in the near term.
 
The writer is head, derivatives and strategy,  PINC Research