Stock market: What F&O rollovers, Nifty breakout & strength in RIL, other stocks suggest

July futures & options (F&O) series will kick off today, with market-wide futures rollovers at 90 per cent, which were higher than the average rollovers of 89 per cent in the past three series. Market-wide futures open interest (OI) stood at Rs 5.03 lakh crore against Rs 4.76 lakh crore seen at the start of Jun series. 

Nifty rollovers were 80 per cent, with Nifty futures OI at Rs 41,600 crore against an OI of Rs 37,100 crore at the start of the Jun series, IIFL Securities noted.  

On the sector front, long build-up has been observed in telecom, cement & infra, IT, banking, metals and chemicals. Autos witnessed short coverings. In contrast, the only sector with marginal short build up was FMCG, IIFL noted.

Analysts said the bullish momentum may continue going ahead, with a technical breakout in Nifty and strength in frontline names suggesting higher Nifty targets ahead. Historically also, the month has been known to deliver positive returns.  

With markets trading near all-time highs, volatility cannot be ruled out. 

“But there’s little doubt that the bullish momentum is here to stay. Historically, July has been a strong month for equities. Over the past 10 years, Nifty has ended in the green 90 per cent of the time, with average gains of 3.6 per cent. Nifty Bank has delivered positive returns 70 per cent of the time, with an average gain of 2.8 per cent,” Nuvama Institutional Equities noted.

This brokerage sees Nifty heading towards the 26,000 mark. It would be prudent to regularly book profits on long positions, it said.

“After close to one and half months of consolidation, Nifty is breaking out of an expanding triangle (bullish continuation pattern). We believe this opens space for the index to move towards its previous highs (26200 levels; 25200 is a strong support now). Strength in frontline names like Reliance Industries (RIL), Bharti Airtel  and banking heavyweights augurs well,” IIFL Securities said.

This brokerage said the current spell of consolidation and breakout is similar to June 2021-July 2021 period, as the brokerage sees the ongoing rally extending to small and midcap stocks as well.

Nuvama said any signs of weakness should be used as an opportunity to initiate shorts—particularly in the banking index, which appears more vulnerable in our view. The recent surge in block deals and promoter selling may be indicative of some froth building in select names, it said.

“Markets have grown increasingly resilient to external noise—from geopolitical tensions to “Presidential tweets”—as such events are proving to have only short-lived effects. Momentum is shifting rapidly, and positioning needs to be equally agile. This month, there are no standout trends in sectoral rollovers, with most tracking in line with their 3-month and previous month average,” it said.

On a tactical front, this brokerage sees a contrarian opportunity in the IT index. Historical evidence suggests the sector could surprise on the upside. Our top picks here are Infosys and Coforge.