Last Five Trading Days Help Nifty, Bank Nifty To Finish October Series With Gains

The Nifty index's futures and options series gained for the second straight month in October.

While the gains came in just last five trading sessions of the series owing to a short-covering bounce, the Nifty 50 Index gyrated 450 points in the last five sessions and 850 points for the series.

Investor sentiment in the last week of the series was boosted by several factors including hopes of a revival in sales during the festive season, better-than-expected earnings, return of meaningful participation by foreign investors after five months and reports suggesting rationalisation of direct tax rates and realigning of equity market taxes.

On the last trading day of the series, the S&P BSE Sensex touched its all-time high whereas Nifty and Bank Nifty closed 1.9 percent and 5.7 percent away from their all-time high levels.

The October series also marked the beginning of physical settlement of all stock futures in the derivatives market by including the most liquid 45 stocks.

Nifty Rollover

The Nifty futures rollover for November series had an open interest of 1.49 crore shares compared with 1.55 crore shares in the previous contract because of short covering in the expiry week.

In percentage terms, however, the rollover for November contract was higher at 84 percent—last seen in August 2016. Rollover in previous series was at 73.3 percent. That came as a significant rise in open interest was seen directly in the November contract.

Nifty Bank Rollover

The Nifty Bank rollover for November series stood at 63.6 percent with an open interest of 0.08 crore shares, compared with a rollover of 57.6 percent in the October contract with an open interest of 0.09 crore shares. That implies short covering of positions with some fresh longs in November contracts.

Nifty IT

The Nifty IT index ended positive for November series with gains of 1.6 percent. The rollovers were lower with an open interest of 7,000 shares compared to 12,000 shares in the previous contract. In percentage terms, however, the rollovers were higher at 95 percent against 75.7 percent in the October series.

Market-Wide Rollover

The rollovers across stock futures were lower at 89 percent with an open interest of 375 crore shares compared to 393 crore shares in the previous contract. The market-wide rollover in the October contract stood at 94 percent. Open Interest was lower on account of short covering in large and mid-caps stocks.

Market Breadth Of F&O Stocks

Out of the total 149 stocks in the F&O segment, market breadth was positive with 99 stocks advancing against 50 stocks declining. Large caps contributed 58 percent of advances in the October series.

Sector Rollover

• Positive rollover: Auto and auto ancillary, consumer goods, engineering, technology
• Negative rollover: Banking-private, power, construction
• Neutral rollover: Oil & gas, finance, metals, pharma & healthcare

FII Set Up Ahead Of November Series

Foreign institutional investors have net short positions for the fourth straight series in November. On index futures, FIIs are net short with 57 percent of the contracts being taken on the short side though the ratio has declined compared to previous series of 66 percent.

On index options, FIIs are starting the series on a mixed note with buying protection via puts to hedge themselves against uncertainty in global markets but are also selling more puts, indicating downside to be limited.

BoB Capital Market's Amit Shah's bets for October series based on rollovers and technical analysis…

Long Bets

• Auto: Bajaj Auto Ltd.
• Consumer Goods: Bata India Ltd., Colgate, Tata Global Beverages Ltd.
• Engineering: Siemens Ltd., Voltas Ltd.
• Finance: ICICI Prudential Life Insurance Company Ltd., Muthoot Finance Ltd.
• Pharma: Torrent Pharma Ltd., Divis Lab Ltd.
• Technology: Tata Consultancy Services Ltd., HCL Technologies Ltd.

Short bets

• Private Banking: RBL Bank
• Finance: Equitas Small Finance Bank, Indiabulls Housing Finance Ltd.