bullish market: rollovers point to a bullish November for Dalal Street

Mumbai: Traders carried bullish derivatives bets, largely in financials and technology, into the November series on Thursday thanks to strong second-quarter results and a halt to the relentless trend of foreign fund sales, which has seen growth challenges in the developed markets were ignored with untamed inflation.

The Nifty rose 0.46%, or 80.60 points, to close at 17,736.9. Intraday, it reached a high of 17,783.90. The BSE’s Sensex closed at 59,756.84, up 212.88 points, or 0.36% from its previous close. Both indices fell briefly below Tuesday’s close, but saw a sharp recovery in the final hour.

The October series witnessed a classic roller coaster ride, with initially bearish investors turning slightly positive towards the end of the series, with the Nifty rising close to 5.5%.

While analysts project a 2-3% drop from current levels towards 17,200-17,300, sentiment continues to strengthen as the Nifty closed its expiration session above its 200-DMA of 16,993, a key long-term indicator. When a stock or index consistently closes below long-term moving averages, such as the 200 EMA, it is considered bearish and vice versa.

Rollovers hint at a bullish Nov for D-StAnalysts now see the Nifty testing 18,000-18,100 levels, translating into a 1-2% gain. Continuing at these levels could push the 50 stock meter to new highs. The Nifty reached its all-time high of 18604.45 last October.

“While October started off weak, we saw consistent buys around 200-DMA as traders failed to derail market momentum,” said Sriram Velayudhan, VP-Alternative Research,

. More than 80% of the current month’s Nifty futures contracts have moved to November, against the three-month average of 79%, preliminary data shows.

Preliminary rollover costs were around 0.3-0.4%, indicating that traders have been aggressively rolling their long positions. Over the past three months, average rollover costs have fluctuated somewhere around 0.20-0.25%.

“We see limited downside to the Nifty and see strong support at 17,200 levels,” said Abhilash Pagaria, head of alternative and quantitative research.

. “The expiration of October signaled very aggressive long rolls in banks and technology stocks such as and . Momentum remains strong and with support from FPIs, Nifty could move towards 18,400 levels.”

Analysts said the seasonal factor also led to sharp moves this month, such as the last 13 times in October since 2002.

“Given the price intensity Nifty has seen over the past few sessions, a consolidation above 17,600-17,700 will be viewed positively,” said Viraj Vyas, technical and derivatives analyst at Ashika Institutional Equities. “Critical hurdle for the index is around the 18,000-18,100 zone, after which new highs are possible.”

Foreign portfolio investors were net buyers in the cash segment on Thursday to the tune of ₹2,818.40 crore – the third consecutive session of stock buying, according to preliminary data on the exchanges.

In the last three sessions, they have bought shares worth more than 2,593.69 crore, dampening capital outflows to below 5,000 crore, data showed.

In September, FPI’s net shares sold were worth 7,624 crore.

Both the market-wide futures and the single stock futures rolled over so far above 94%, compared to the latest three-month average of 91% and 93%, respectively.

In addition to finance and technology, traders created bullish bets in telecom, real estate and pharmaceuticals. They were careful with capital goods, cement and power.

“Indian markets saw a decent recovery in the last hour of trading. What stood out was long-roll aggression, especially among banks and financial institutions. We now see a possibility for the Nifty to move towards 18,300 in subsequent sessions,” said Velayudhan of IIFL Securities.

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