Traders: Traders’ rollover of bearish F&O bets hints at a gloomy December

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Mumbai: Traders carried forward bearish bets to the December derivative series with the recent market rally running out of breath amid persistent selling by foreign investors, stretched valuations, brokerage downgrades of Indian equities and concerns over faster liquidity tapering by the US Federal Reserve.

Nifty rollovers on a provisional basis stood at 82.57%, in line with the three-month average of 82.31%, said analysts. The November futures and options contracts expired on Thursday.

“Rollovers are more on the short side and positions are more on the short side. Market is in a downtrend and the current bounce-back is shallow,” said Siddarth Bhamre, director-alternative investments and research at InCred Equities. “Till the Nifty doesn’t go above 17,800 I wouldn’t advise adding longs.”

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The Nifty fell 1.8% in the November series and the Sensex slipped 2% during the same period.

The Nifty had touched a record high of 18,604.45 on October 19 and the Sensex touched an all-time high of 62,245.43 on the same day.

Amid expiry of November series on Thursday, stock markets regained some lost ground after a bumpy ride in the last few days. The Nifty ended up 131.05 points, or 0.75%, at 17,546.10 and the Sensex ended up 454.10 points, or 0.78%, at 58,795.09. A 6% surge in Reliance Industries contributed to most of the gains in the indices.

FPIs sold local shares worth ₹2,300.65 crore and DIIs bought to the tune of ₹1,367.8 crore.

“FPI activity is not negative in derivatives in the last two-three sessions, but previous short positions are still intact. Total long positions of FPIs as a percentage of FPI positions is 53-54%, which is not a bull market situation,” said Bhamre.

Analysts see the 17,200 level as a crucial support for the Nifty as a fall below that may open the door for a fresh round of selling.

“Going into the December series, we expect the index to trade in the range of 17,200 to 17,800. A revisit to 17,200 is not ruled out,” said Sriram Velayudhan, vice president — alternative research at IIFL Securities. “17,800 has become a strong resistance as important points like the neckline of head and shoulders breakdown and the 34-day exponential moving average coinciding with it. Only in an event where this key level is breached on the upside, room for higher levels would open up,” said Sriram.

Rajesh Palviya, head — technicals and derivatives at Axis Securities, also said the Nifty is likely to move in the 17,200-17,800 band in the December series.

“A breach on either side will decide the market trend. Real estate, telecom and textile companies are likely to outperform in the December series,” said Palviya.

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