High rollovers into Feb series but markets remain cautious

Retail and HNI rollover short positions while FIIs rollover longs

Don't want to miss the best from Business Standard?

Traders were mounting both bearish and bullish bets in Nifty futures at the expiry of the January series derivatives segment, indicating uncertainty about a further rise in the indices. On Thursday, the January series ended with rollovers at 76 per cent, more than the three-month average of 68 per cent. Open interest (OI, meaning unsquared positions) in these was at an 18-month high, analysts said.

The benchmark indices have climbed eight per cent so far this year, on the back of an interest rate cut by the Reserve Bank of India a fortnight earlier. Sentiment in the market has been overwhelmingly positive, with the markets touching record highs for each of the past 10 days.

“The market mood is now divided, as both long and short positions have been rolled over to the next series. Rollovers and OI in the Nifty futures is very high and we think the first few sessions of the February series would be good,” said Siddharth Bhamre, head of derivatives, Angel Broking.

Foreign institutional investors were seen rolling over their long positions, while retail traders and wealthy individuals were seen rolling over short positions. Derivatives analysts said the options build-up numbers also indicate low confidence in a sustained upward direction. Options build-up was the highest in the 8,800-strike, which is a rare in-the–money strike price, analysts said.

“Generally, options build-up during expiry is highest in the out-of-money strike price. But because of the huge movement in the markets this month, traders are not sure whether the rise will continue,” said Sahaj Arawal, deputy vice-president (derivatives research), Kotak Securities.

Experts say the Nifty is expected to find strong support at 9,000-9,200, while resistance could be seen at 8,775-levels. At 9,100-9,200, some shorts will be covered.

About 83 per cent of the market-wide positions were rolled over, analysts said. Most of the stock future rollovers were seen in the banking, oil & gas and health care sectors. Bank Nifty futures witnessed 68 per cent rollover, the same as the three-month average. Analysts said the rollovers were high because many banking stocks in the mid-cap and small-cap category had been beaten down in January, on the back of weaker earnings numbers. This temporary dip paved the way for long positions to be created and carried into the February series.

Stocks opened marginally lower on Thursday but picked up pace during the final hour of trading. The BSE Sensex ended the day up 122 points or 0.4 per cent, at 29,681. The NSE Nifty saw a 10th straight session of gains, closing 38 points up or 0.4 per cent at 8,952.

“As the Nifty approached expiry, buying was seen in front line stocks, pushing the index towards 8,950, to end the series with gains of 9.8 per cent,” said Agrawal.