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The market trend in recent months has been nothing short of euphoric as the benchmark Nifty 50 has settled the past four consecutive derivatives series with net gains.
During the same time, the index has scaled over 14 percent higher to hit fresh all-time highs, stopping at just a kissing distance of the 20,000-mark.
A strong run of four consecutive series has been seldom seen before, and there were worries that the index may finally fall short of luck in the August F&O series.
However, the rollover positions to the August F&O series suggest there may be more fuel left in this joyride.
According to data from Nuvama Alternative & Quantitative Research, Nifty futures rollovers stood at 84 percent, compared to the average of 70 percent in the last three series.
Market-wide rollovers also stood at 93 percent, in line with the average rollovers of the last three series at 93 percent, as per the report.
FII position gives some concerns
Some caution is seen in the rollovers by foreign institutional investors (FIIs), which forecasts bouts of consolidation and profit-taking in the August series.
“During the July F&O series, FIIs’s index future long/short ratio was up above 2.50x. However, at the start of the August F&O series, it stands at 1.41x as they have trimmed some long positions and added shorts,” a report by YES Securities highlighted.
“FII long ratio is now at 59 percent, as against 66 percent in the previous series. This implies more hedged short positions while entering the August series,” Religare Broking mentioned in its report.
Regardless, the open interest for the August F&O series is higher by around 25.7 lakh as against the previous series. This indicates the addition of overall fresh long positions in the index, and suggests that the overall sentiment is still supporting bulls.
Long positions near support zones
Even among the long positions added, Motilal Oswal Financial Services Ltd (MOFSL) highlighted that several of those positions have been added at support zones which have acted as a good base and may keep the market afloat in August.
MOFSL anticipates a positive to range-bound move for Nifty in the August series, considering the overall derivatives activity.
Another sense of positivity emerges from the fact that a seasonality check of the last 26 years suggests that the month of August gives a positive return of 0.88 percent with the index closing the month in green 59 percent of the time, Viraj Vyas, technical and derivatives analyst at Ashika Stock Broking, highlighted in his report.
Moreover, the average strike price of August futures contracts is around 19,700, which, according to Religare Broking, will act as a pivot for the month. Considering these factors, Religare Broking believes that till the time Nifty trades above 19,700, the resistance might only be near the 20,200-20,300 levels.
“We expect the Nifty to find strong support at 19,300-19,400 levels for the August series while 19,300-20,300 is the expected range,” the brokerage added.
Vyas also expects to see a continuation of the secular uptrend and believes that any dip in the Nifty towards the 19,000 levels will likely be bought into.
In conclusion, it seems like the Nifty’s journey towards greater all-time highs will continue in the August F&O series as well. However, this time around, the ride is going to be filled with potholes of profit-booking.
On the sectoral front, most sectors like auto and auto ancillary, banks – private and PSU, finance, metals, capital goods, consumer goods, media, oil and gas, power, and pharma and healthcare are expected to do well. On the flip side, infra, fertilisers and chemicals, and textiles are likely to remain under pressure.
Also Read: Can Nifty sustain its mojo in July F&O series? Here’s what rollovers say
Disclaimer: The views and investment tips by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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