If Nifty holds 11,600-11,650 during the upcoming event, the probability of rally beyond the important psychological figure of 12,000 may increase.
June series had no major triggers as we saw index consolidating for the first three weeks and then some respite in the final week. For the major part of the series, the benchmark index was swinging in the range of 11,600-11,850 without any relevant open interest change in F&O space.
This week, the market started the proceedings on a sluggish note and once again the major support zone of 11,650–11,630 was challenged in the initial part. Fortunately, similar to recent patterns, strong buying emerged at lower levels that pushed the index significantly higher to enter a relatively safer zone.
Although, last couple of days we saw some struggle around 11,800–11,850, Nifty eventually managed to close below 11,800 by adding more than half a percent to the previous week’s close.
In the recent rally, fresh longs were formed in the futures segment. We believe this development in the final week of June series could be due to the positive sentiment by traders ahead of the Union Budget 2019 scheduled on July 5.
Now, let us dig into the rollover data and try to find out some cues for the July series. Rollover in Nifty stood at 80.35 percent, which is certainly above the 3-month average of 77.89 percent. This suggests that the longs formed in June series have been rolled over to the next series.
As far as Foreign Institutional Investors (FIIs) are concerned, they formed short positions in index futures throughout the last series. As a result, their ‘Long Short Ratio’ which was at 60 percent during the start of June series plunged to 53 percent. But, they seemed reluctant in rolling these bearish bets in the coming series and hence, once again this ratio has shot up to 62 percent, indicating they are starting the July series with majority of long positions in the system.
Now, such a shift in stronger hands position ahead of the Union Budget is likely due to the anticipation of positive development during the Budget. The volatility index is currently around 15, such low IV’s are again an indication of strength in the market.
Considering the above data points, we believe if Nifty holds 11,600-11,650 during the upcoming event, the probability of rally beyond the important psychological figure of 12,000 may increase. Hence, traders are advised trading with a positive bias and should maintain a strict stop loss around the above mentioned support zone.
