December expiry seen around 6,000 levels

Bets on the level to which the benchmark index of the National Stock Exchange “the Nifty” would fall, called put options, are concentrated at a higher level than before, indicating more positive sentiment building up around the current upward direction of the market, say experts. A similar shift is seen in bets that the index would rise.

“There has been strong build up of puts at 5900 levels over last 2-3 trading sessions. Last Friday’s pullback rally in later half of trading session indicates some kind of shift in momentum. The calls have shifted base from 6000 levels to 6100,” said Karun Mutha, head-derivatives at HSBC Invest Securities.

“The growing open interest in Nifty December 6000 put option and signs of closure of open interest in 6000 call option suggests Nifty may gather momentum if it holds 6000. Options data indicates the rollover of Put open interest from 5800 to 5900 strikes indicating strong support is placed at 5900,” said a report from ICICI Securities authored by Amit Gupta, Azeem Ahmad and Raj Deepak Singh.

Among the sectors expected to do well are telecom, technology and oil & gas stocks, which have seen a build-up of long positions, according to ICICI Securities.

Metal stocks recovered as traders sought to purchase them to cover their short positions., gaining 3.94% during the week.
Major gainers last week included realty which rose 5.83% and IT, which was up 1.78%. Power and capital goods ended in the red, losing 5.6% and 0.9%, respectively.

The Vix, an index measure of volatility was on the decline as markets trended upward during the week.

By Friday, the Sensex had gained over 1% or 208.81 points to end at 20773.66 at for the week. The Nifty closed at 6011.60. The volatility index fell below 20 to 17.65, falling close to 13% during the week.

Last week saw average daily volumes of Rs1 lakh crore in NSE derivatives segment, which were lower than the average volumes of Rs1.40 lakh crore witnessed over the last few months.

Volumes have been lacklustre in this month so far and the this week is expected to be quiet as well. Even volatility is expected to remain low in line with low participation as the year draws to a close.

“Absence of large participation by FIIs this week would be key. We do not expect major volatility and Nifty December series may close to 6,000 levels,” said Karun Mutha.