February set to be worst F&O series since November 2016; bank stocks hit

The equity markets set to post their worst performance in 15 months in the February future and option (F&O) series that will end today. At 12:25 pm; Nifty 50 index was trading at 10,351 and has slipped 6.5% thus far, most since the November 2016 F&O series. Derivatives contracts expire on last Thursday of every month.

In November 2016, Nifty recorded 7.5% fall in the F&O series, after the government announced the demonetisation of all Rs 500 and Rs 1,000 banknotes earlier that month.

This time around, the state-owned banks are the top losers, with Nifty PSU Bank index slipping 16%, while the Nifty Bank (down 9.5%) and Nifty Private Bank (down 8.9%) so far have also lost considerable ground.

“The Nifty February expiry rollover stands at 39.04% on Wednesday, and is lower than its three-month average of 46.04% and its six months average of 44.25%. The Bank Nifty February rollover at 36.33% is lower than its three-month average of 41.67% and its six-month average of 43.48%,” Nirav Chheda, derivatives and technical analyst at Nirmal Bang said in Wednesday rollover report.

PSU banks have suffered the most in the February 2018 series, falling 14% to 36% after Punjab National Bank (PNB) disclosed Rs 114 billion scam to the stock exchanges on February 14in one of its branches in Mumbai. 

“The lower roll levels are a major cause of concern. With a long March expiry, short roll arbitrageurs are seeking relatively higher levels to rollover the positions. If levels don’t expand on Thursday, we don’t rule out selling pressure in the VWAP (volume weighted average price). However we will revisit our stance based on how the rolls pan out today,” analysts at Edelweiss Securities said in a rollover analysis.

Around 14 stocks from the F&O companies, including PC Jeweller, PNB, IFCI, Allahabad Bank, Jaiprakash Associates, Bank of India, GMR Infrastructure, Just Dial, Syndicate Bank and Union Bank of India skidded in the range of 20% to 38% till Wednesday.

Can Fin Homes, Ashok Leyland, IDBI Bank, Apollo Hospitals, MRF, Castrol India and Hindustan Zinc, however, have bucked the trend thus far by gaining more than 5% during the series.