Rollovers fall as investors turn risk-averse

The Nifty futures' contracts saw a rollover of only 66% compared to a three-month average of around 70%

Traders ended the December series derivatives segment expiry on a cautious note rolling over fewer positions in the Nifty futures segment.

The Nifty futures contracts saw a rollover of only 66 per cent, compared to a three-month average of around 70 per cent.

The market fell four per cent in the December series following global tensions due to drop in crude oil prices and Russian currency.

Experts said rollover indicates that trades have turned risk-averse amid selling by overseas investors.

“In the first half, the index tested 8,600 levels but failed to sustain the same. A sell-off was triggered which pushed the index to 7,950 on the downside. A bounce back was seen towards 8,300 towards the end of the series,” said Sahaj Agarwal, deputy vice-president (derivatives) at Kotak Securities.

However, the bounce-back did little to help the mood in the market, said market participants who expect the Nifty to slide further going forward. For the next series, the Nifty is expected to trade in the 8,050-8,450 range, analysts say.

Even as the Nifty futures saw fewer rollovers, the market-wide rollovers were much better with many long positions being built into the system. Derivatives experts said the next series is expected to start with an open interest worth Rs 77,000 crore. The market wide rollovers for the December series into the next series stood at 84 per cent, slightly below the three-month average of 85 per cent.

Bank Nifty contracts saw rollovers of 74.8 per cent much higher than the three-month average of 64 per cent, indicating traders could have shifted focus to the high-beta banking space.

“Bank Nifty saw high rollovers and mainly long position build-up. But the open interest positions were fewer. We are not cautious on the Bank Nifty but since we expect the Nifty to correct in the first half of January, we are not advising going long on the Bank Nifty futures,” said Siddharth Bhamre, head of derivatives, Angel Broking.

According to experts, technology, metal, real estate stocks could continue to remain under pressure. High volatility in December pushed up hedging costs causing rollover costs to shoot up by over 25 basis points. According to one expert, the rollover cost stood at 95 basis points in December, as opposed to 70-75 basis points seen in the previous months.