Short-covering fuels market rally in Nov series, bullish momentum likely to continue

Nifty will start the December series with an open interest (OI) of 1.07 crore shares compared to an OI of 1.16 crore shares at the beginning of the November series.

The Nifty50 rose 6.77 percent during the November month F&O expiry. Nifty futures rollover stood at 73.06 percent, which is significantly lower compared to the last month’s expiry rollover of 83.39 percent and its three months average of 77.41 percent.

The Nifty will start the December series with an open interest (OI) of 1.07 crore shares compared to an OI of 1.16 crore shares at the beginning of the November series. It saw significantly lower rollover with a higher cost of carry (+0.67 percent) and a fall in open interest, compared to its previous month, indicating covering of short positions in November series.

India VIX, known as the fear indicator, rose 8.18 percent in the November series and closed at 12.69. The foreign portfolio investors (FPIs) long-short ratio rose from 10.88 percent on October 26 to 35.75 percent on November 30, as the FPIs covered their exiting short positions in Index Futures and marginally increased their exposure to longs.

The Put-Call ratio, a sentiment indicator, too, spiked from 0.63 on October 26 to 1.15 on the last day of the November series expiry, indicating Put writers’ dominance throughout the November series.

On the Options front in the December monthly expiry, the 20,000 Strike Put option has the highest open interest with 34,47,400 contracts followed by the 19,500 strike Put option with 27,32,400 contracts. While on the Call side, the 21,000 Call has highest open interest with 32,90,100 contracts followed by the 20,000 Call strike with 23,92,550 contracts.

The Nifty has closed above the 88.6 percent Fibonacci retracement level of 20,069, drawn from the high of 20,222 made on September 15 to the low of 18,838 made on October 26. The market index appears ready to imminently challenge its all-time high of 20,222.

The Nifty has concluded four consecutive weeks in the positive territory, and its current trajectory suggests a strong underlying momentum, hinting at a probable positive closure for the ongoing week as well.

The maximum Put open interest for the Nifty is placed at 20,000 Strike and is likely to act as a strong support. The option activity at 20,200 strike is likely to provide cues about Nifty’s future direction.

Disclaimer: The views and investment tips expressed 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.