Derivatives data suggest a higher rollover leading to increased buying in coming days: Epic Research

Mr. Mustafa Nadeem, CEO, Epic Research

Nifty ended the second last week of the year on a positive note adding almost 1% to its kitty after a profit booking last week. Weekly Expiry, Negative global cues turning positive, continued fall in Crude and strength in INR manifested the sentiments overall in a buying momentum. Expiry dominated by option writers while a higher rollover percentage for Nifty sets the tone for coming month tilted to bulls.

The start for the shortened week in a festive season saw thin trading as volume dried up and was seen lowest in last five weeks. Overall cues for the market were broadly negative with DJIA, and Other major indices trading near years low. Though a rebound in U.S markets positing strongest gains in a day after decades somewhat turned the scene upside down.

Nifty saw profit booking tracking previous week sell-off in global markets, although, lower-level buying triggered at 10500 - 10550 levels which coincide with 50 DSMA saw a sharp rebound in price action. Technically, there was also support from 14 Day RSI which is above 50 marks and indicating the strength to be in bulls favor. Price action was in the lower range of the band; thus, the pullback was sharp and fast.

With this, there was a sharp rebound in DJIA which was single day biggest gains ever. That was a game changer for the sentiments, especially for other markets. Rallies like these bear significant importance in measuring the sentiments at lower levels. A fall in Crude oil prices to $42 was another factor which added weight to this momentum.

Roadmap for the coming week depends on the strength of these factors and how price action react. This is the third time we are approaching the critical zone of 10950 - 11000. This needs to be taken out furiously and a close above this would indicate that with better breadth. A failure to do so would throw back prices back in its range of 11000 - 10500, evident from November till date.

Derivatives data suggest a higher rollover and with that, we expect some buying in coming days since it has been comparatively higher, 74.2%, than its 6-month average of 69.29%. The only worrying part to this is the lower than average rollover in Bank Nifty which has a higher weight. It stood at 64.13% VS 6 month average of 72%.

Source : Equity Bulls

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