How Analysts See September F&O Series To Shape Up

Volatility in India’s stock market spiked on account of expiry of August futures and options contracts, and profit-booking, dragging down the benchmarks.

The India VIX Index—the popular fear gauge that tracks investors’ perception of volatility for a month ahead—touched an intraday high of 20.22 on Aug. 25. It has spiked 15% during the August series.

BQ Prime spoke with market analysts on how the September series could be shaping up.

‘Violent Expiry’

“This was quite a violent expiry, but it was not completely unexpected. Though a lot of people were thinking that we have taken support at the 20-day moving average near 17,350, and the rise after that was quite fast in the next couple of days, this was a big resistance,” Abhijit Phatak, head of marketing and business development at Definedge Solutions. “In fact, the Nifty 50 stopped exactly at the Fibonacci level of 61.8%, which is quite crucial. So, unless it closes above 17,750, it’s going to be a bit dicey.”

“Unless it closes above 17,750, we might see another pullback. On the way down, if it closes below 17,450, slightly below today’s (Thursday’s) low, then it might go all the way and test the maximum put OI, which is near 17,000... I wouldn’t be surprised to see the Nifty—if it is not crossing 17,750—testing 17,150-17,200 levels,” he said.

That, Phatak cautioned, could come to pass swiftly even as early as next week.

Meanwhile, as the markets await Jerome Powell’s comments at the Jackson Hole symposium, Phatak said since the U.S. Federal Reserve chief’s remarks will come after market hours on Friday, investors need to be “mindful of their positions and what they carry over the weekend”.

‘Positive Series’

Chandan Taparia of Motilal Oswal Financial Services remained optimistic of the broader index’s recovery. The analyst termed the August series “positive” on account of its healthy run-up and momentum leading up to 18,000-levels.

“The last couple of days, however, were quite volatile and the volatility index also spiked. The good part we noticed is that declines were being bought comparatively. Today (Thursday) was due to the selling pressure in selective heavyweights encountered due to rollover pressure. But overall, 17,150-17,350 is going to act as a major support,” said Taparia, vice-president of equity derivatives and technicals, broking and distribution at Motilal Oswal.

While this is quite early to make any projections about the OI inventory, there are signs of September F&O series capable of mirroring the festive cheer, Taparia said.

“If I just look at the price setup and the rollover side, the data is still showing that logs are there. If I look at the Nifty, rollover there is near 76%, roll cost is near 0.23%. If you look at the Bank Nifty index, this rollover is 78%, roll cost is almost flat. So, slightly lower rollover seen in the Bank Nifty compared to the last series, and in-line rollover in the Nifty indicate that we are likely to be in a broader range and any small decline could be bought,” he said.

“As of now, my understanding is that 17,150 to 18,000 is going to be the broader range. I think towards the end of this series, the market might even attempt 18,000-18,500 to celebrate the Diwali festival.”