July F&O: Nifty futures rollover slips below six-month average amid tariff uncertainty

The July futures and options (F&O) data, brought out by Axis Securities, has showed that a slight shift towards caution in market sentiment is noticeable, with Nifty series rollover slipping below its six-month average amid U.S. tariff uncertainty. This indicates that market participants maintained a wait-and-watch approach ahead of the new series, rather than showing strong conviction in carrying forward existing long positions, ahead of the August 1 deadline for Trump’s tariff.

The rollover for Nifty50 in July declined to 65.6% on Wednesday (July 30), indicating a slightly subdued rollover activity compared to the previous expiry's 72.5% on the same day, as per data compiled by Axis Securities. The figure was also lower than both the three-month average of 69.2% and the six-month average of 66.9%. In simple terms, rollover is the process of extending position in a futures contract from the current month to the next month's expiry.

“The lower rollover percentages suggest a cautious sentiment among Nifty participants, potentially indicating some unwinding of positions or a wait-and-watch approach ahead of the new series, rather than strong conviction for carrying forward existing long positions,” the report noted.

At the sectoral level, infrastructure, capital goods, new age businesses, and pharma witnessed higher rollover. This indicates strong investor confidence and continued bullish sentiment in these sectors, suggesting they might remain areas of market interest.

On the flip side, chemicals, telecom, metals, oil & gas, and technology sectors experienced lower rollover, suggesting a more cautious approach or potential profit booking in these sectors. 

During the June series, there was a steady increase in equity derivatives, both in terms of volume and value. The one-month average volume was 76,987, the three-month average volume rose 43% to 1,10,270, while six-month average volume stood at 1,15,384, up 5% from the three-month average, said Rajesh Palviya, SVP - Research, Axis Securities.

In terms of value, the one-month average was ₹14,55,313, and the three-month average value rose to ₹20,66,063, reflecting a 42% increase. The six-month average value was 20,86,528, a 1% increase from the three-month average, Palviya said.

Market-wide rollover rises above 3-month average

Meanwhile, market-wide rollover for July stood at 80.4%, slightly lower than 80.6% a month ago, but higher than the three-month average of 79.7% and the six-month average of 78.7%. “This robust market-wide rollover suggests broader confidence and a sustained willingness among participants to roll over positions into the next series, reflecting a generally optimistic outlook across the broader market,” the report noted.

The option data for the July series indicated a strong call open interest (OI) at the 25,000-strike price, followed by 25,200. In contrast, a substantial concentration of Put OI was observed at 24,500, with additional levels at 24,800. “This suggests the likely range for the current expiry is between 24,500 and 25,000.”

Rollover cost, too, saw a marginal dip, sliding to 0.36% on Wednesday as compared to 0.39% in the last expiry. This marginal reduction in rollover cost can be interpreted as a slight easing of demand for carrying forward positions, potentially aligning with the cautious sentiment observed in Nifty rollovers, the report highlighted.

The data showed that Bank Nifty rollovers were considerably lower than the 65.2% on the same day of the previous expiry, and also significantly below its three-month average of 65.3% and six-month average of 65.8%. This marked decline in Bank Nifty rollover points to a more cautious or subdued sentiment within the banking sector, potentially due to profit booking, uncertainty, or a shift in focus from banking stocks, the brokerage said in its report.

Eicher Motors, UltraTech, LIC of India see higher rollovers

On the stock front, Eicher Motors, UltraTech Cement, Piramal Pharma, Indian Bank, and LIC of India posted higher rollovers compared to the previous series. This indicates sustained or increased bullish conviction and strong participation in these specific stocks, suggesting continued investor interest and potential for positive momentum in the upcoming series.

On the other hand, RBL Bank, Inox Wind, Muthoot Finance, NMDC, and IEX saw a drop in rollover activity. This lower rollover in these stocks was attributed to profit booking, a decline in speculative interest, or a shift in investor preference away from these scrips.

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