Nifty September F&O series delivered expectational returns amid high volatility. The September derivatives series began with a steady rise in the benchmark indices and then witnessed some profit-taking. However, in the second-half of the series, bulls came roaring and the market saw a relentless rally, giving the bears no breathing room.
Nifty 50 ended the September F&O series with a strong gain of 4.2% and settled at 26,216. Large-cap index heavyweights saw a sharp outperformance with the resurging private sector banks. Nifty Bank surged 6.3% and closed at 54,375 level.
Strong market gains were driven by robust inflows from Foreign Institutional Investors (FIIs) and consistent participation from Domestic Institutional Investors (DIIs). FIIs were net buyers, investing $2.9 billion, while DIIs contributed an additional $1.39 billion, providing continuous support to the market.
On the contrary, the mid-cap and small- cap indices underperformed with modest gains of 2.7% and 20 bps, respectively. The ratio of the NSE Mid-cap index over the Nifty is trading at 2.3066 levels as against its all-time high levels of 2.3739 as observed on September 16, 2024.
“The numbers speak for themselves-it's clear that HNIs and retail investors, who typically favor the SMID pack, weren't as active, leaving institutional flows, especially Flls, to drive the market higher in the latter half of the series,” said Abhilash Pagaria, Head of Nuvama Alternative & Quantitative Research.
In September series, the sectoral indices which gained the most were Realty Index (up 9.4%), Financial Services Index (up 6.7%), Metals Index (up 6.6%), Private Bank Index (up 6.4%), Auto Index (up 5.7%), FMCG Index (up 4.7%), Media Index (up 1.7%), Pharma Index (up 1.6%), Energy Index (up 1.1%), while the sectors which settled in red are PSU Bank Index (down 2.3%), IT Index (down 1%).
Nifty futures rollovers stood at 79%, higher than the last three series average of 75%. Nifty futures will start the October series at a higher open interest (Ol) base of ₹451 billion or 17.2 million shares, versus Ol of ₹356 billion or 14.2 million shares seen at the start of September series.
Market-wide futures open interest at the start of October series stands at historic highs of ₹4.803 trillion as compared to ₹4.730 trillion at the start of September series, Nuvama report said. Market-wide rollovers is at 88%, higher than the three-months average of 88%.
Bank Nifty rollover stands at 67%, lower than its last 3-series average of 72%. The Bank Nifty October series has started with a cumulative future open interest of 2 million shares as against its last 3-series average of 2.6 million shares.
The series has started with a Flls long short ratio in index futures at 4, second highest level observed on the day of inception in the last 2 years. Flls long short ratio in stock futures stands at 1.54, highest level observed on the day of inception in the last 2 years.
Overall data suggest extreme bullish positioning by the Flls. Historically, such a bullish positioning has coincided with a rangebound movement in the Nifty amidst high volatility, JM Financial said in a note.
Analysts expect the ongoing bullish undertone to persist, bolstered by ample liquidity in the market.
“October seasonality is historically strong, with Nifty closing in the green in 8 out of the last 10 years, averaging gains of 1.7%. The Nifty Bank has an even more impressive track record, gaining in 9 out of the last 10 years, with average gains of 3.9%. With sustained FII participation, we expect HDFC Bank and other private banks to outperform,” Pagaria said.
He expects metals and selective IT stocks to perform well, while within the Auto sector, M&M and TVS Motor Company are long candidates, while Hero MotoCorp and Ashok Leyland present short opportunities. As for FMCG, he expects underperformance, with Hindustan Unilever and Britannia Industries as bearish trades.
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