Market lull makes traders impatient

Profit-booking seen ahead of March series F&O expiry

Are traders getting impatient with the market after the sideways moves last week? If the trends in creation of Nifty options are to be followed, that may be the case even as foreign institutional investors (FIIs) pour money into Indian stocks. Analysts said some smart traders have cut their bullish options bets on Nifty late last week after the market showed signs of losing steam following a blistering rally.

"Traders are liquidating long positions. There is some put-writing happening in Nifty options signalling that traders are not confident about the Nifty going crossing the 6500-levels," said Ashish Chaturmohta, head of technical and derivative analysis, Fortune Equity Brokers.

Benchmark indices ended the week flat, down

about 0.3%. The BSE Sensex closed at 21,755 while the NSE Nifty ended at 6,494.

Top brokerages and analysts are counting on foreign flows to continue propping up the markets in the pre-election rally which has gripped the markets. Last week, Goldman Sachs upgraded India to "overweight", assigning an aggressive 12-month target of 7,600 on Nifty.

But, with the indices reverting to range-bound moves, traders are cutting aggressive bullish bets ahead of the expiry of March series derivatives contracts on Thursday

"Traders are not willing to take a strong directional positions. There is a lack of confidence because of the sudden up move that we saw in early March. It is more of a consolidation phase in the market," said Sahaj Agrawal, deputy vice-president - derivatives research, Kotak Securities. ""The open interest in the 6400-puts and 6500-puts are very significant indicating that traders are not very confident," he said.

Technical analysts said that the Nifty would likely remain within the 6400 and 6600-levels in the week ahead with the possibility of it breaching the record high of 6,574 touched on Tuesday last

week. The BSE Sensex touched a record-high of 22,040.

Fresh upsides would only be possible if the Nifty crosses 6600-level, technical analysts said.

The possibility of that however remains bleak according to analysts. The expiry of the March series derivatives contracts on Thursday would keep markets volatile. Some amount of profit-booking is also expected in the week ahead, analysts said.

But undertone remains bullish boosted by the unabated flows from foreign institutional investors (FIIs). Overseas investors were net buyers at Rs 7,347 crore including provisional data from the exchanges for Friday.

"All this apprehension about flows going down because of tapering or other global concerns have not really proved themselves in India. Globally, fund managers are underweight on emerging markets and that has already been discounted for by Indian markets," said

Sandeep Singal, co-head (institutional equity), Emkay Global Financial

FII-buying is likely to continue into sectors like capital goods, infrastructure, oil&gas and banking, especially state-owned banks.

"Investors are basically looking at generating alpha in the portfolio by participating in the cyclical sector stocks. It is possible that sectors like technology and healthcare would not be able to match the broader-market returns with the rupee looking to stabilise at these levels," said Piyush Garg, executive vice president, ICICI Securities.