 "F&O rollovers insights: FIIs up index shorts; reduce longs in stock futures")
The derivatives market ended the April series on a positive note, thanks to the back-to-back gains in the last five trading sessions.
The Nifty climbed 1 per cent, while the Bank Nifty ended 2.9 per cent. The month April was marked with bouts of volatility, as the benchmark indices scaled record highs followed by a steep price correction, and the eventual equally sharp pullback.
Sectorally, metals, realty and PSU Banks were the top movers in the April series, while the IT index underperformed amid the Q4 numbers.
Going ahead into the May series, the ongoing Q4 earnings season is expected to weigh on the market sentiment in the initial few days. Thereafter, the markets will seek direction from the US, posts the Federal Reserve rate decision on May 01. Towards the end of the month, the focus will shift to anticipation of the general elections result. While, the outcome seems certain of the ruling party coming back to power, the attention will be on the margin of victory.
The US Fed is widely expected to keep interest rates on hold till September. The 10-year bond yields in the US were quoting around 4.73 per cent, its highest levels since November 2023. The focus will be on the Fed commentary for likely hint on the timing of a possible rate cut.
Back in the Indian derivatives market, bank stocks are likely to be in focus on expectations of stronger Q4 show by state-run banks. The under-performing IT sector too will be in focus on hopes of a pullback rally.
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Also do note, there are two trading holidays in the May series. Equity market will be shut for trading on May 01 and May 20 on account of Maharashtra Day and Lok Sabha elections in Mumbai, respectively.
Cues from F&O rollover to May series
According to rollover analysis by Nuvama Alternative & Quantitative Research, single stock futures rollovers stood at 94 per cent, while Nifty rollovers at 65 per cent.
As per the report by the research firm, Nifty futures rollovers at the start of the May series, stand lower at 65 per cent vs. 77 per cent (last three series). Alongside, Nifty futures will start the May series at higher OI base of Rs 28,000 crore as against an OI of Rs 27,300 crore seen at the start of April series.
Meaningful long-side OI addition is seen in sectors such as consumption, energy, realty, FMCG and banks.
Data suggest, that foreign institutional investors (FIIs) have added fresh shorts in index futures, with net shorts now standing at 54,000 contracts vs. 24,000 contracts in the preceding series.
At the same time, FIIs have reduced long positions in the single-stock futures to 323,000 contracts from 448,000, the report stated.
Net longs from HNIs (High Net Individuals) in single-stock futures stand at historic highs. Analysts at Nuvama Alternative & Quantitative Research highlight that, such instances in past, often resulted in the index trading within a narrow range and more dynamic action unfolding across various sectors.
It expects the Nifty to consolidate in the 22,350 - 22,700 range, before striking new all-time highs in the May series.
Auto remains the preferred top pick followed by chemical sector. Among individual stocks, the report states that Eicher Motors, Mahindra & Mahindra, Maruti, ITC, Hindustan Aeronautics and NMDC could do well.