July F&O Series Setup: History favours the bulls after a strong end to June

The Nifty begins the July series on Friday, June 27, having closed out the June series on a very strong note on Thursday.

We had highlighted last month that history has been kind to the Nifty in the month of June, and that is exactly what transpired with the index posting its fourth consecutive series of positive returns, with gains of over 700 points.

The trend is no different in July. This new series commences with the Nifty just 700 points shy of the earlier record high of 26,277, which the index had it on September 27 last year.

In fact, over the last 10 years, the July F&O series has reported negative returns in only two of them.

While history is kind to the Nifty in July, a record that the bulls would aspire to break this time around is the fact that the index has not had five positive F&O series since 2017.

The Nifty also begins the July series with rollovers of 79.5%, in comparison to the three-month average of 79.1%. In fact, the rollovers are also at the highest levels in four months.

The new series also begins with Open Interest for the Nifty at a four-month high, at the highest levels since March this year.

Longs are returning to the system with foreign institutions covering their shorts built earlier. The FII long exposure figure at the start of the new series is higher than June and at par with what was seen at the start of the April and May series. Client long exposure stands at 53%.

This series also stands out as it marks the end of the June quarter, which means companies will begin reporting their business updates at the start of the month, followed by the quarterly results.

With reports and sound bytes emerging of India nearing a trade deal with the US, and the July 9 tariff deadline will be another important trigger for the markets going forward.

That, along with flows from foreign institutions will be key to watch this series.