Rollover numbers hint Nifty may touch 12,000 in October Series

Traders carried forward their bullish bets to the October series on expiry of the September derivatives contracts on Thursday on expectations the market could advance further with the government’s corporate tax rate cuts reviving sentiment. Analysts said the positions in October series are suggesting traders expect the Nifty to touch 12,000-mark.

“Longs have been aggressive in rolling forward their positions,” said Yogesh Radke, head of alternative and quantitative research at Edelweiss. “The index could scale 11980 levels while 11385 level can act as a support.”

On Thursday, benchmark indices, which had fallen in the previous session by over 1 per cent on news of impeachment enquiry against US President Donald Trump and profit booking, recovered most of Wednesday’s losses mirroring firm Asian markets. The Nifty ended up 131 points, or 1.15 per cent, at 11571 and the Sensex ended up 396.2 points or 1 per cent at 38989.


Among Nifty call options in the October series, open interest, or outstanding positions, were the highest at 11200, 11500 and 12000 strikes. The 11000 strike holds the maximum open interest among put options.

Nifty rollovers stood at 73.1 per cent on Thursday versus the three-month average of 74.28 per cent. The rollover cost stood at 60-65 basis points versus 38-40 basis points in the previous expiry, suggesting traders carried forward their bullish positions.

Analysts said majority of the bearish bets on the market were covered last week after the government’s decision to cut corporate tax rates in an attempt to revive the economy. The Nifty and Sensex gained more than 5 per cent on Friday on corporate tax cut followed by a 3 per cent rally on Monday. The Nifty rose to a high of 11694 on Monday. But, with the optimism surrounding the stimulus losing steam, some traders have decided to retain their bearish bets in the October series.

“Shorts were covered after the announcement of corporate tax cut but still around 40 per cent shorts were carried forward because some investors are still worried about global slowdown and fiscal impact of the corporate tax cut,” said Amit Gupta, head of derivatives at ICICIdirect.

Some in the market are concerned about the impact of the corporate tax rate cut on the widening fiscal deficit and whether all sectors will benefit from the cut.

“Post the two-day rally, the market fell as bears had hoped that the market may see selling pressure at higher levels. So many shorts were carried forward,” said Chandan Taparia, derivative analyst at Motilal Oswal.

Gupta believes that if the positive momentum in the market continues, then these short positions may get covered, leading to further rally in the market.

“Shorts have been carried forward which can ignite the next leg of the rally," added Gupta.