July F&O Expiry Alert: Nifty Futures Open Interest At Peak — Volatility Ahead?

The Thursday trade for the July series expiry is expected to be volatile for the market. The Nifty Futures Open Interest is sitting on nearly Rs 50,750 crore of open interest going into Thursday expiry; this is more than the open interest seen at the time of the September 2024 expiry.

At the end of Wednesday trade, the market had witnessed nearly 64% of the rollover in the Nifty futures.

While Wednesday trade did indicate some bit of short covering, with the FII long positions inching above the 14% mark, there will be other factors that will play a bigger role by the end of Thursday trade.

Amongst the global factors, the Fed held on to the rates but did not indicate any rate cut at the September meeting. The labour market is holding up, and inflation continues to be above the trendline for the Fed.

The bigger issue of US trade tariffs took the street by surprise on Wednesday evening. Trump imposed a 25% tariff on imports from India and unspecified penalties for sourcing crude from Russia. The quantum and rates are expected to be specified by the end of the week. This has already raised the average rate for India to 24%. 

The foreign investors who have been anticipating this have increased their open interest in the Nifty Futures. At the end of Wednesday, FPIs held Rs 33,308.59 crore in open interest in the Nifty Futures and Rs 7,750.4 crore in the Nifty Bank Futures.

That is, about 65% of the Nifty Futures open interest is held by FPIs and 53% of the Nifty Bank Futures are held by the foreign investors. 

The foreign investors long position stood at 14.06% going into the July expiry. Which means nearly 86% of the FPI open interest, i.e., Rs 28,645 crore, are short positions that would have been either already rolled over or will be covered by the end of Thursday. 

On the options front, 24,600 Put is looking to provide support, as there is not much Call activity at that level. But resistance seems to be at 24,500 Call.

Foreign investors have been net sellers for the eighth consecutive day in the cash market. Buying has been stock-specific and in stocks where growth is visible and performance has been better in first-quarter earnings.

The markets will weigh the US tariff, and sectors with high US exposure will be impacted, as these tariffs will reduce the competitiveness of the Indian exporter compared to Asian peers. The US has imposed higher tariffs on Asian trading partners so far.