Mid-cap banking stocks likely to under-perform ::Emkay

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Mid-cap banking stocks likely to under-perform

Nifty July futures added close to 0.22 million shares in open interest to 22.67 million shares from 22.45 million shares. The cost of carry declined to 0.36% from 3.76% on a daily basis suggesting build up of short positions. Nifty July futures accumulated maximum open interest of 22.67 million shares in the current series, significantly lower than the past 3 series average of 26.62 million shares. With selling pressure continue to prevail, any significant increase in open interest in Nifty July futures will confirm the trend reversals.

Maximum open interest among Nifty July call options is seen at 5800 strike with an open interest of 8.56 million shares. Among Nifty July put options, the maximum open interest is concentrated at 5500 strike with an open interest of 7.68 million shares. With increased accumulation observed in lower strikes, we expect a shift down in the accumulation pattern. 

Selling pressure is likely to prevail in mid-cap banking stocks. Most of the stock futures have seen an increase in open interest along with a decline in cost of carry suggesting build up of short positions. Open interest in Bank of India increased to 3.22 million shares from 3.10 million shares along with a decline in cost of carry to -15.26% from -9.28%. IOB added 2.27% shares in open interest to 1.53 million shares on back a decline in cost of carry to -10.58% from -1.27%. We expect the sector to under perform in the near term.