Nifty gained 14% in the April series, Highest in a decade - April Expiry today

Nandish Shah, Retail Research - HDFC Securities.

Nifty broke the four series losing streak as it gained 14% in the April series. This is the highest series to series gain since May 2009.

In the Stock futures' segment, Open interest in terms of number of shares at the beginning of the May series is at 270 Cr shares. It is 36% lower than the March 2020 series and 50% lower than all-time high Open Interest we have seen in February 2018. These lower leveraged positions despite surge of 14% in the Nifty in the April series Indicates that markets are light in-terms of positions which augurs well for the markets going forward.

One more notable thing is the Open Interest in the Nifty Futures. We are starting the May series with the Nifty future Open Interest of 96 lakh shares, lowest at least since 2005.

These lower Open Interest in the Nifty and stock futures at the beginning of the may series Indicates investors are still skeptical about the future. Lack of confidence creates a wall of worry, which the markets are adapted at climbing. Lower participation amongst market players tells us that the derivative positions are not likely to be a milestone around the neck of the markets.

To Sum it up, Lower stock Futures' Open Interest despite 14% rise in the Nifty in the April series, Lower Open Interest in the stock futures segment-lower leveraged positions, Lower Open Interest in the Nifty Futures' in terms of number of shares (Nifty Futures OI is at fifteen year low), long roll-over by FIIs' in the Index Futures' segment and aggressive Put writing at 9500 levels Indicates that down side is limited in the market and May is also going to be a buoyant month.

Therefore, for traders our advice would be to use any correction towards 9500-9600 to accumulate long positions with SL of 9300 levels. On the higher side, an immediate resistance is seen in the vicinity of 10000-10200 levels where Calls have been written.

After a buoyant April series for Indices, it is better to concentrate on selected mid-cap stocks which got battered during the last few series on the back of forced unwinding. We feel after massive fall in the F&O Midcaps from the January high, stock specific opportunities will keep on presenting themselves in the markets.

Source : Equity Bulls

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