FIIs trim Nifty futures bets in Dec

Possibility of sharp swings ahead of state election results in mid-December led to traders rolling over fewer positions

Traditionally, December is a good month for equities, but that hasn’t encouraged traders to aggressively carry forward their bullish derivative bets to the December series. The possibility of sharp swings in the market, ahead of the state election results in mid-December, led to traders rolling over fewer positions on Thursday, the expiry day of the November series.

Rollover in November futures of the benchmark Nifty to December stood at 72 per cent, higher than the previous expiry. But at 18.6 million, the total open interest in index contracts, including those of December and January series, was lower compared with 24 million when the October series expired last month.

Analysts said foreign institutional investors (FIIs), who rolled over long positions on expiry of the September and October series, unwound their bets during this expiry. “The fall in FIIs’ positions can be linked to the likelihood of higher volatility in December because of the state election outcome,” said Siddarth Bhamre, head (derivatives), Angel Broking. “Also, worries about Fed tapering are having an effect.” In November, FII investments in Indian shares have slowed to Rs 6,100 crore, against Rs 12,600 crore in September and Rs 18,000 crore in October.

Announcement of results for the state Assembly elections in Chhattisgarh, Rajasthan, Madhya Pradesh, and Delhi is scheduled in the second week of December.

Analysts said traders would start building bets on the election results through the next few days. A large section of influential traders is likely to use Nifty options to bet on the election results, with volatility set to heighten.

Traders do not expect the Nifty to fall below 6,000, going by the position build-up in put contracts in the strike. The Nifty rose 0.6 per cent to close at 6,091.85 on Thursday. Nifty December futures rose 0.7 per cent to close at 6,160.

“There has been aggressive writing at Nifty 6,000 put. This shows this level is a strong support for the Nifty,” said Ashish Chaturmohta, head (derivatives), Fortune Equity Brokers. The Nifty’s put call ratio, a popular sentiment indicator (the number of put options divided by the number of call options), at 0.85, signals the index might be oversold, said Chaturmohta.

The market-wide rollover to the December series was about 79 per cent, against the average of 70 per cent in the previous three expires.

Rollover in Bank Nifty stood at about 59 per cent, in line with the previous expiry. Analysts said traders carried forward short positions in Bank Nifty futures to the December series. “There is a high possibility banks would underperform in December because many strong hands have gone short on banks,” said Bhamre.

Among sectors, capital goods and metals have seen strong rollover, with traders carrying forward long positions to the December series.