High rollovers as market bets big on the Budget

The Nifty futures rollover stood at 71.4%, compared to the previous three-month average of 58%

Traders carried forward higher bets to the July series on Thursday, expiration of the June series’ derivative contracts, signalling a bullish underlying mood on hopes of positive announcements from the Union Budget on July 10.

The Nifty futures rollover stood at 71.4 per cent, compared to the previous three-month average of 58 per cent. The market-wide rollovers were 84 per cent as against the previous three-month average of 80 per cent. High overall rollovers indicate the market is expecting more stock-specific action.

“Going by the rollover trend, the underlying sentiment is still positive and investors are continuing to hold on to their long positions in anticipation of some good announcements from the Budget. However, one needs to be cautious, as there might not be any big-bang announcements, given the macro economic challenges we face,” said Yogesh Radke, head of quantitative research at Edelweiss Financial Services.

The Nifty on Thursday ended 76 points lower at 7,493 due to weakness in oil and gas stocks after deferment of the gas price rise. The index, however, gained nearly four per cent during the June derivative series, after gaining around eight per cent in May.

“Without doubt, the market is pinning hopes on the Budget. However, it is unlikely we will see any pre-budget rally. Specific stocks could do well,” said Siddharth Bhamre, head, investment advisory and derivatives, Angel Broking.

 

Provisional data showed strong rollovers in Power Grid, Reliance Industries, NMDC, Sterlite and Tata Steel. High-beta stocks such as Unitech and JP Associates also saw these.

Market players are expecting stocks to soar new highs if the government takes steps in the Budget to spur growth. Stocks from the engineering, capital goods and real estate spaces are expected to remain under the spotlight in the run-up to the Budget.

Open Interest (OI, the positions not settled), are also high coming into the next month. The marketwide OI at the start of the July series will be Rs 69,200 crore compared to Rs 67,700 crore at the start of the May expiry.

Bhamre said any disappointment on the Budget front could impact stocks. He said the Nifty will find support at 7,450 levels; on the upside, there will be resistance at 7,650-7,700. The Nifty, after scaling above 7,600 in the first half of June, retreated due to tensions in Iraq.