Traders should take cautious view for Dec F&O series: Chandan Taparia, Anand Rathi

MUMBAI: The November series ended on a positive note with the benchmarks hitting an all-time high. As the markets have already seen a sharp run-up, traders should take a cautious view for the December series, says Chandan Taparia, Derivatives and Technical Analyst, Anand Rathi.

In an e-mail response to economictimes.com, Taparia said as long as the Nifty holds above 8,370-8,410 levels, the on-going rally can extend to 8,600-8,650. Excerpts:

Q: The Nifty continued its uptrend in the November series and hit the new life-time high. Do you expect the rally to continue in next series?

A: November series witnessed a strong bull run and breached 8,500 for the first time in history. It registered a lifetime high at 8,540 levels with the monthly gains of around 3.50 per cent. Overall, the trend is the positive, but looking at the overbought scenario, one needs to be cautious and take a calculated risk ahead of the RBI policy, GDP and fiscal data.

Q: What is the view for December series as per recent data?

A: Monthly VWAP (volume weightage average) of the November series is near 8,410 levels and crucial support is at 8,370 zones.
Till it holds above 8,370-8,410 zones, the market would be in the grip of bulls and this rally can extend to 8,600-8,650 levels. But if it fails to hold above 8,370, then the momentum may fizzle out and the index may drift down towards 8,250-8,180 levels.

Although the medium term trend is still positive, but one should take a cautious view in the December series. Also, use the Bear Put spread strategy to hedge positions.

Q: What about the rate sensitive Bank Index futures?

A: Bank Nifty futures outperformed the Nifty index as it is up by 7 per cent in this series versus the Nifty gain of 3.50 per cent. It crossed its previous life-time high of 16,794 and rallied towards 18,329 levels. It has now a major support at 17,750 and then at 17,500 levels. The immediate hurdle exists at 18,300 and then at 18,500 levels.
VWAP of the Bank Nifty index is at 17,650 and it is trading 300 points above from VWAP levels.
Q: How is the rollover data?

A: Nifty futures have seen rollover of 64.43 per cent with roll cost of 0.61 per cent compared to 63.62 per cent, which was the total rollover of October series.

The rolls are better in terms of the number of contracts as well as in terms of percentage. Higher rolls are indicating that the participants are still holding their bullish bet on the market.

As per the recent data we are expecting total rollover to cross 72 per cent in this series. Nifty futures have seen the highest D-1 (one day before the expiry) rollover in the last one year.

(The same kind of rollover was observed in Oct 2013 series when the Nifty was at 6,200 levels)