Ahead of the Union Budget, markets witnessed a sharp rally but managed to close the January expiry on a flat note. Nifty Futures and Bank Nifty Futures gained ~0.45% and ~1.5%, respectively, on an expiry-on-expiry (eoe) basis, ending the January expiry on a positive note for the third consecutive year ahead of the Union Budget. The Nifty traded in a 400-point trading band throughout the series, yielding a positive payoff to short vega option writers.
Sector-wise, the Nifty IT index posted strong gains of ~8% on an eoe basis, as fresh long positions were created on account of good Q3FY19 earnings, positive commentary by the management of major heavyweights, and positive comments on the H1B visa issue by the US President.
FIIs' speculative index futures long/short ratio hovered around the 0.8x level for a major part of the series. FIIs continued to pull out from Indian equities, although the quantum remained marginal.
Rollovers of Nifty/Bank Nifty in December stood at 62%/77% (1.87cr/14.4 lakh shares)
as against 74%/64% (2.23cr/11.5 lakh shares)
in the last series, while market-wide rollovers stood at 88% vs. 86% in the previous month.
Nifty rollovers were lower in terms of total open interest (number of open positions) vis-à-vis last month, indicating an unwinding of short positions in the index. We expect the index to trade with a positive bias in the series ahead.
February expiry starts with the maximum open interest buildup in Nifty call options at 11,000CE (2.78mn shares) and for Nifty put options, at 10,700PE (2.99mn shares).
Here is how traders are placing their bets on various stocks ahead of the Union Budget FY20 and the February series.