March Rollover Data: Short Covering Sparks Nifty’s Surge – What Rollover Data Reveals for April

March Series Wrap-Up: Bulls Take Control

The Nifty index closed the March series with an impressive 4.64% rally, signalling a strong comeback for the bulls. However, a closer look at Rollover Data suggests traders are cautiously approaching the market. Nifty futures rollovers fell to 76.09%, significantly lower than March's 83.57% and below the three- and six-month averages of 80.33% and 78.72%. This decline indicates hesitation in carrying forward positions, indicating a possible change in market sentiment and a possible trend reversal.

April Series: What's Changing?

As the new series begins, open interest (OI) has dropped sharply, from 17.64 crore shares in March to 14.07 crore. Typically, when open interest declines alongside an index rally, it suggests short covering is at play. Bears seem to be closing their positions, fueling optimism for a potential continuation of the bullish momentum. However, the lower rollover percentage signals that traders remain cautious, keeping an eye on key market triggers.

Volatility Remains Low – But Will It Stay That Way?

The India VIX often called the market's 'fear gauge,' stayed largely stable throughout March. It started at 13.40 and closed the month at 13.30, staying below the critical 15-mark. While this indicates low uncertainty, upcoming macro events like India-US trade policies, the RBI's MPC meeting (where a 25bps rate cut is expected), and inflation data could bring fresh volatility into the market. For now, the Rollover Data suggests traders are cautiously optimistic.

Foreign Investors Are Back in the Game

Foreign Portfolio Investors (FPIs) played a significant role in driving March's rally. Their Long-Short ratio, which started at 15.19%, remained weak mid-month but surged to 39.86% by the series' end. This sharp jump suggests that FPIs aggressively unwound short positions and added fresh long positions, taking advantage of an oversold market. If this trend continues, FPI buying could add fuel to the bullish momentum in the April series.

Key Resistance and Support Levels to Watch

The derivatives market gives us a clear picture of the key levels that could define the market movement:

• Resistance Levels:

  • 24,500 Call Option has a significant open interest, making it a key resistance level.
  • 24,000 Zone is another hurdle for bulls.

• Support Levels:

  • 23,500 Put Strike holds the highest open interest, serving as immediate support.
  • 23,000 Level is another strong support zone where heavy put writing has been observed.

If Nifty breaks above the 23,800-24,000 range, we could see an aggressive short-covering rally that might push the index towards 24,500-24,800 levels.

March Performance Hints at a Trend Reversal

Nifty snapped its losing streak for the first time in five months, recovering strongly from its March lows. The index closed above its 20-month EMA, a historically strong support zone, reinforcing a structurally bullish outlook. With rollover percentages down, open interest shrinking, and FPIs turning net buyers, the previous downtrend appears to be losing steam. This increases the chances of a sustained upside move in April—provided key resistance levels are broken.

From a technical standpoint, Nifty has established a solid base near 23,000-22,700, an area that was previously a resistance but has now become support. This level aligns with key short-term moving averages and vigorous put-writing activity, making it a crucial point for traders to watch. If Nifty clears 24,000 convincingly, we could see a sharp rally, aided by short covering and renewed bullish sentiment across various sectors.

Trading Strategy: Buy on Dips, Keep an Eye on 24,000

As long as Nifty stays above 23,000, the bulls are in control. A break above 24,000 could trigger fresh buying interest, with 24,800 as the next potential target. Traders should stick to a "Buy on Dips" strategy, focusing on the 23,000-22,700 support zone for possible entry points.

With April shaping into a crucial month, market participants should closely monitor Rollover Data, options activity, and FPI flows to gauge the next big move.