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December Expiry Derivatives Summary

For the December Series NIFTY closed at around 18191 after Volume weighted average price (VWAP) based buying activity was witnessed in the last hour of the day.

Nifty January Futures contract started with around 105 lakhs vs 111 lakhs in December. Banknifty futures have seen an Open Interest of around 22 lakhs vs 30 lakhs. At expiry, VIX was at around 14.8% levels implying around 690 odd points swing in the NIFTY in next 30 days. The highest Nifty January monthly options Open Interest is at 18000 PE and 19000 CE. Nifty 19000 Call Open Interest stands at around 40000 contracts and 18000 Put Open Interest at around 64000 contracts.

In Dec series, Cement, Textile & Realty @ 96% are the sectors where highest rollover were witnessed, whereas Infrastructure @ 86% is the sector where lowest rollover was witnessed.

We believe FINANCE and PHARMA are the sectors that can outperform the index in January series.

TVSMOTOR @1080 and ABCAPITAL @ 145 are our top preferred picks for the January series.

January Series Sector Outlook

Nifty

Nifty futures has rolled around 79% vs 82% compared to the last month. The Open Interest for the new contract is lower by around 6.8 lakh w.r.t to the last month contract. Some Short Covering & Long rolls into January series lead to this. FIIs Long short ratio is now at 57% : 43% vs 77% : 23% last series. Nifty futures in the January contract has seen some long rollovers and we believe fresh build up might follow on into January series later on. We believe 18000 might be the pivot for this month only below which the trend turns negative. The upside potential is around 18600-18700 in this series

FIIs have sold around 11k Cr in cash market for the December month.

We expect Nifty to be in 18500-17800 range for the first fortnight of January series. With lower participation by the traders in January series and with the VIX at 14.5%, we expect Nifty to be in 17600 - 18800 range for the January series.

Banknifty

Banknifty futures rolled at around 86% vs 88% compared to the last month.

Banknifty futures have seen unwinding of nearly 9 lakh shares w.r.t. the last month. Some long unwinding lead to this. With Price gain of half a percent in December series, Banknifty has outperformed the Nifty by 2%, however we do not expect the same in January series.

For this series, ratio wise (Banknifty/Nifty) has a resistance at 2.42 and support at 2.24. The ratio between Banknifty and Nifty currently at around 2.36.

However the major support for Banknifty would be around 41500 levels. We expect Banknifty to be in 41500-44500 levels for the first fortnight of January series.

Strategy

Nifty Long Iron Fly:- Buy Nifty 25th January 18200 CE @ 320 & 18200 PE @ 200 and Sell 17600 PE @ 74 and Sell 18800 CE @ 72 ; Net premium at 374, Stop loss at 270 Target 575.

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