Domestic equity benchmarks Sensex and Nifty 50 ended June with their best gain in 2024, boosted by the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) alliance coming to power and as foreign inflows returned to the market. The Nifty 50 and Sensex rose 6.6 per cent and 6.9 per cent, respectively, in June, recording their best monthly gains this year.
The benchmarks crashed over five per cent on June 4, their worst session in more than four years, after the BJP won the Lok Sabha elections with a slimmer-than-expected margin. There were concerns about higher welfare spending because of Modi's reliance on alliance partners but his cabinet appointments signalled political continuity to investors.
In the last session of the month, the NSE Nifty 50 fell 0.14 per cent to 24,010.60 and the S&P BSE Sensex settled 0.27 per cent lower at 79,032.73, on the day. Both the indexes rose about 0.5 per cent earlier to hit record highs on June 28. Snapping a four-session winning run, the equity indices succumbed to selling pressure after mid-session when profit-taking emerged on select counters.
On the weekly front, the BSE benchmark jumped 1,822.83 points or 2.36 per cent, and the Nifty 50 climbed 509.5 points or 2.16 per cent. The Sensex breached the historic 79,000 mark on Thursday, and the Nifty 50 hit the 24,000 level for the first time in intra-day trade. The market capitalisation (mcap) of BSE-listed companies hit an all-time high of ₹439.24 lakh crore.
In its derivatives monthly rollover report, domestic brokerage firm Religare Broking revealed that Nifty 50 closed above 24,000 after volume weighted average price (VWAP)- based buying activity was witnessed throughout the session. Religare highlighted that at 96 per cent, realty sector witnessed the highest rollover in the June series. Whereas at 56 per cent, the media sector witnessed the lowest rollover.
Nifty futures has rolled at around 76 per cent compared to 72 per cent which is slightly higher with respect to the previous series. The Open Interest (OI) for the new contract is higher by around seven lakhs with respect to the last month contract implying more long positions.
Bank Nifty futures rolled at 71 per cent compared to 68 per cent, lower than the previous month. Banknifty futures have seen addition of OI of around four lakh with respect to the last month. This might be because of the higher positions in Bank Nifty during the June expiry, according to Religare Broking.
Vedanta, Biocon, United Breweries Ltd (UBL), and Indus Tower are the top picks for the July series, according to Religare Broking.
The stock did not do anything in June series but added significant OI of more than 38 per cent. ‘’With more rolls, now at 97 per cent against 93 per cent previously, we believe these are likely longs. With good cash based accumulation, we anticipate the stock to move higher with a stop at 415,'' said Religare Broking.
Gaining 11 per cent in price, the stock added 19 per cent OI in June series implying long positions. The rolls were at 98 per cent compared to 95 per cent in last series. With pharma as a sector poised to do well, Biocon is no different. One may look to go long in the stock with a stop at 320, according to the brokerage.
The stock rose six per cent but added substantial OI of 51 per cent in the June series. ‘’Though rolls were less, but with more long positions and decent cash based buying, we believe stock is poised to see new highs. One can look for creating fresh longs with a stop at 330,'' said the brokerage.
The stock gained nearly eight per cent in price with addition of 25 per cent OI. Those positions have been rolled to the new series to the tune of 91 per cent as compared to 79 per cent previously. ‘’With support at 1,940-1,960 holding, we believe the stock has the potential to do well in July. One should be Positively biased in the stock with a stop at 1,900,'' said Religare Broking.
Nifty futures contract OI started with around 151 lakh compared to 144 lakh in June. Bank Nifty futures have seen an OI of around 27 lakh compared to 23 lakh in June. The highest Nifty July monthly options OI is at 23,000 PE and 24,000 CE. Nifty 24,000 call OI stands at around 1,15,000 contracts and 23,000 put OI at around 1,39,000 contracts.
‘’At expiry, VIX was at around 14 per cent levels implying 750 odd points swing in the Nifty in next 30 days,'' said Religare Broking. The brokerage believes that fast-moving consumer goods (FMCG) and pharma are the sectors that can outperform the index in July series.
Foreign institutional investors' (FIIs) long ratio is now at 82 per cent compared to 13 per cent previously in index futures implying less hedged positions into the July series. The IVs for options have declined substantially now at 14 per cent compared to 24 per cent implying less swing in July series.
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Technical View: The majority of the rolls which happened to the July series was on the Long side. For July futures with an average price of around 23,750 which becomes a pivot for the month. Till the time Nifty trades above 23,700-750 on spot, the index is in a BUY ON DIPS mode for the first weekly expiry.
‘’We expect the Nifty to find strong resistance around 24,400-500 levels for July series. On spot basis 23,700-24,400 might be the range for Nifty for first fortnight of July series,'' said Religare Broking.
Bank Nifty had outperformed against the benchmark in the June series. Going forward, we believe this would continue. ‘’For this series, ratio wise (Bank Nifty/Nifty) has a resistance at 2.21 and support at 2.14,'' said the brokerage.
‘’The ratio between Bank Nifty and Nifty currently at around 2.19. The major support for Bank Nifty would be around 51,500 levels. We expect Bank Nifty to be in 51,500-54,000 levels for the first fortnight of July series,'' it added.
On the outlook for Nifty 50, Ajit Mishra, SVP - Technical Research, Religare Broking Ltd said, ‘’ Rotational buying across key sectors is driving the current uptrend, with expectations that Nifty will hold the 23,400-23,700 zone in case of profit-taking, while eyeing levels above 24,500.''
IT and FMCG sectors are expected to play pivotal roles alongside banking in maintaining a positive sentiment. Selective participation from heavyweight stocks in other sectors is likely to support the upward movement, according to Mishra.
‘’The consolidation phase in broader indices is expected to conclude soon, although participation may be limited to quality names. Traders are advised to continue with a buy on dips strategy, focusing on careful stock selection,'' he added.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, and not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
