Volatility is on the rise ahead of the monthly derivative expiry due on February 28 and could further escalate due to the rise in geopolitical concerns. There is a higher possibility we could see rollover of short positions for March series.
Data suggests, in FY19, bulls pushed the Nifty in the green in six out of the last 10 months. The index rallied about 2 percent on the January expiry day, followed by 1.2 percent gain seen in November, and 1.1 percent rise seen in May 2018.
Nifty recorded negative returns in four out of the last 10 expiry days. The index fell nearly 1 percent on October expiry day, followed by June and September when it saw a decline of 0.7 percent each.
The Nifty futures rollovers for March series stand at 40 percent at the time of writing this article. It recorded a rollover of 61 percent for February series, 74 percent for January and 71 percent for December series.
The highest Put base has shifted to 10,700 strikes with 26 lakh shares while the highest Call base is at the 11,000 strikes with 45 lakh shares, as of February 26.
The level of 10,600-10,700 is likely to act as crucial support for the index while 11,000 strike is likely to act as crucial resistance for Nifty in March series.
The Nifty futures open interest continues to remain lower as compared with the last series. Additionally, a Volume Weighted Average Price (VWAP) for Feb series is at 10,830 with VWAP-2 sigma level of 10,590. Hence for a few weeks, 10,600 will remain key support.
On the higher side, an immediate hurdle is placed at 10,850 as last three Nifty expiries have happened in the range of 10,800-10,850. Only a close above this level could catalyse Nifty’s up move towards its highest option base of 11,000 Call, suggest experts.
“As the tension near the border escalated, traders took a cautious stand and de-leveraged the positions. Due to uncertainty, the IV’s (implied volatility) rose significantly. However, Put OI blocks continued in lower strike indicating major support,” ICICIdirect said in a report.
“For the major part of the day, selling continued in the index but it managed to close marginally below 27,000. Protective Put buying was seen in ATM and little OTM strikes. Closure of these positions can be seen if the index manages to move above 27,200 that is likely to trigger short covering,” it added.
The long build-up was seen in stocks like Yes Bank, Ambuja Cement, PVR, Pidilite, Zee Entertainment, and India Cements.
The short build-up was seen in Infosys, Jindal Steel, Tata Chemicals, Syndicate Bank, Hexaware, and OFSS, data showed.
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