Rollover Analysis - Record foreign inflows pushes Nifty to 13k - YES Securities

Record breaking FII's inflow driving the show as stellar moves seen on BankNifty which was up ~20% expiry to expiry lapping up gains of +40% in two back to back series, Indian markets exhibited massive record run as bazooka unleashed with ~7.6 bn$ flows in November series itself highest ever in single month. Highlights for the November series are a) Short squeezed followed by long buildup on Banking and Financials b) India VIX dropped below to ~20 mark as markets welcomed US election outcome c) Reliance massive underperformance in past two series as Banking made comeback to driving seat d) Record turnovers in F&O segment on expiry day indicates participation across the board.

Rollovers for Nifty/Bank‐Nifty stood at 79% (1.2cr shrs)/79% (14.8lakh shrs) vs 77% (1.05cr shrs)/73% (16.5lakh shrs) previous month, aggregate base of no. of shares rolled were higher ~15% compared to previous month on Nifty while roll cost expanded to ~50 points on expiry day as buoyancy seen at record close. Market wide rolls remained higher ~93% vs 3month avg. of ~91%, sharp declines in options implied vol's indicates traders bracing for consolidation of gains.

FII's derivative stats, index futures long rolls stood at 91% vs 3month avg. of 69% while index futures short rolls at 50% vs 62% on 3month avg. December series starts with index futures long to short ratio of 3.37x vs 3month avg. of 1.5x at start of series. On options front, Max. call/put OI on Nifty for December monthly series stands at 13k call (OI 2.5mn) and 13k put (OI ~2mn) contracts. Near term overstretched indicators suggests mild mean reversion possible as Index to consolidate and digest the gains made in past two series with wild intraday gyrations to continue.

Strategy for December 3rd series:

Bull call Ratio spread on Bank Nifty Dec series weekly expiry (3rd Dec): 3 leg Buy call strike 29,500 and Sell strike 30,000 call and Sell 30,500 call with outflow of ~58 points. (1:1:1) Target: 250/400 on spread Stop Loss: 31k on Bank Nifty Dec fut

Rationale:

- Banking stocks remained resilient with minor dips getting bought into, we expect momentum to carry forward next month.

- Moderation on gains possible going forward, strategy have fixed loss of outflow ~58 points on downside below 29,500 mark on 3rd Dec expiry.

Sector wise positioning:

- Banking & Fin: Sharp short covering seen on Banking stocks with SBI, HDFC Bank and Bandhan Bank saw aggregate shed in OI from previous expiry with strong gains.

- Auto: Maruti standalone on the only auto stock to close negative eoe basis, with hint of short buildup, Balkrishna saw massive jump in long buildup base of ~80% OI fresh addition.

- Energy: Reliance only stock negative in Oil & Gas space with bouts of shorts buildup seen at higher levels.

Source : Equity Bulls

Keywords