Indian Markets Review / Outlook - May 4, 2020 - Geojit

Market Review: Indian markets remained shut on Friday on account of Maharashtra day. The Nifty Apr futures ended at 9842.40 with a gain of 3.07% or 293.25 points on Thursday while May futures closed at 9830.85 with a gain of 2.75%. Apr month rollover stood at 67.95% yesterday as compared to 43.22% on the previous day. Nifty May future traded at discount; stood at (-)29.05 points against a premium of 14.4 points on Wednesday. Nifty's VIX rose marginally by 0.44% to close at 33.9875 versus 33.8375 on the previous day. FIIs were buyers for seventh consecutive day in the F&O segment; bought derivatives worth Rs 2689.67cr on 30 Apr as per provisional figures. On the open interest front, selling was seen across all derivative segments with wounding down future index short by 38.66% and reducing exposure in Future index long by 18.52%.

Nifty outlook

After a stellar month that saw a 18% gain in Nifty, and Index futures positions diametrically opposite to that prevailing at the end of March expiry, it is time to look for serious excesses that lead to reversals. Rollovers have improved over last month indicating a revival in risk appetite but are not at extremes. Call OI build up on the expiry day was the highest at 8000 suggesting that the base of the market is shifting higher. But, rest of the money on calls looks to have gone into far OTMs, which are vulnerable to long liquidation. FIIs' allocation into long bets in both index options as well as stock options is near 46 percent which is par for the course. However, long bets constitute over 64 percent of the index future positions, which is at an extreme even when with a look back period extending to the pre corona period when Nifty has been on a steady rise. This has made the index futures vulnerable for correction.

Source : Equity Bulls

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