F&O Rollovers Hint At Turbulent August for Nifty as FIIs Load Up Short Positions

After a July performance that defied historical trends and ended in the red for the Nifty, the August series stares at turbulent times ahead, if F&O rollovers are anything to go by. FIIs emerged as net sellers of Indian equities to the tune of $ 2.1-bn in July and the shift towards bearishness seems even more evident in their rollovers for the August F&O series.

The FII community has significantly loaded up short rollovers at the start of the August F&O series, hinting at their weakening sentiment. Their net shorts stood at 138,000 contracts, a sharp uptick from the 35,000 short contracts seen at the start of July series.

Nifty futures rollovers stood at 76% as compared to the average of 79% in the last three series, a report by Nuvama Alternative & Quantitative Research showed. Meanwhile, Axis Securities noted that the rollover cost for the August F&O series came at 0.36%, down from 0.39% in the previous expiry, indicating a slight easing in demand for carrying forward positions, in line with Nifty’s cautious sentiment.

Analysts at SBICAP Securities also echoed a similar sentiment, equating the decline in rollovers and a spike in roll cost with a degree of hesitation among traders to carry forward aggressive positions into the next series. “In the new series, the FII long-short ratio dipped sharply to 9.59%, its lowest level since June 2024. This steep decline indicates a significant drop in bullish bets by foreign institutional investors, highlighting their cautious stance at the beginning of the August series,” SBICAP Securities wrote in a note.

On the other hand, market-wide rollovers stood at 90%, slightly higher than the three-month average of 89%. A similar trend was seen in stock futures rollovers which came at at 92%, higher than the average rollovers of last three series at 91%.

What Does August Holds in Store for the Nifty?

Analysts at Nuvama envision the August series to be an eventful one, with key triggers including the MSCI August 2025 Rejig announcement and the actual adjustment happening within the same month. Not to mention, the continuation of the Q1 earnings season and an unfolding of Trump’s trade tariff developments. Another significant development to watch is the Nifty 50 reshuffle.

Meanwhile, SBICAPS also highlighted the mixed seasonal trend shown by August, which stands true to expectations of the ongoing F&O series being a turbulent one. “Tracking seasonality, over the past 18 years, the August month has often exhibited a mixed trend for Nifty. On 9 occasions, the index has concluded on a positive note with an average gain of 3.68%, while on 9 occasions, it has ended on a negative note with an average loss of 4.45%,” the brokerage mentioned.

Key Levels To Watch

Basis the rollover trend and August’s mixed seasonality, Nuvama analysts expect the series to remain volatile given the multiple moving parts. “We anticipate Nifty to trade within a broad range, with strong support near 24,200 and resistance around 25,300,” the firm forecasted.

As for SBICAPS, the sentiment is slightly more optimistic as the firm expects the zone of 24,600-24,550 to act as important support for the Nifty. “If the index slips below the 24,550 level, then the next crucial support is placed at the 24,300 level. While on the upside, 25000-25050 will act as an immediate hurdle for the index,” it said.

Estimates from Axis Securities aren’t far off either as the brokerage sees the August F&O series expiring with the Nifty futures in the range of 24,500 and 25,000.

As for the sectoral front, analysts largely see sectors like autos, FMCG, private banks and pharma sectors are best positioned for long trades in the August expiry, with visible long buildup and momentum. On the flipside, IT, defense, oil & gas, media, and realty are likely to emerge as underperformers.