Market Geared For Selling Spell

Sensex February futures, maturing tomorrow, ended at a discount to the cash market, thereby indicating that the stock markets are braced for a selloff tomorrow, and spilling over into March. Incidentally, February contracts mature on the day the budget for 2002-2003 is being presented. "If one goes by the direction of the index futures, the markets might witness a downturn," derivatives dealers said.

Traders in the derivatives markets rushed to close their positions and some even shifted their positions from February to March.

The sensex, meanwhile, snapped out of a four-day euphoria to close lower, but the trigger for the selloff came after unidentified men set ablaze a train in Gujarat, killing up to 30 Hindu activists. The BSE benchmark index today ended with a loss of 7.08 points at 3,705.66, after touching an intra-day high of 3,758.11 in early trades.

"The train incident has added to jitters in stock market, which is already edgy ahead of the Budget," a dealer said.

Added Jignesh Shah, strategist, ASK RJ Investment Management, "Investors preferred to book partial profits on several counters as they are unsure how events will shape up over the next few days."

But worryingly, the February sensex futures, which started with a huge premium of 18.48 per cent over the sensex (in the cash market) on February 1, have gradually witnessed an erosion in the premium to end at a discount in the last two days. "This displays a nervousness ahead of the budget and the expectation of a selloff tomorrow," another dealer said.

Today, sensex February futures closed at 3688.30 points as against the cash sensex close of 3705.56, reflecting a discount of 0.44 per cent. On Tuesday also, sensex February futures ended at a discount to the cash sensex.

Even Nifty futures traded at a discount that ranged from a low of eight points to the cash Nifty to a high of 16 points. The February series of Nifty futures closed at 1,182 as against the cash Nifty close of 1,189.20, indicating a discount of 0.60 per cent.

Incidentally, the derivatives segment of the NSE recorded an all-time high daily volume of Rs 1,530.33 crore on Wednesday. The previous highest volume of Rs 1,494.33 crore was on February 7, 2002.