Traders carry bullish bets to January series

But market participants expect mood to be relatively somber early in 2014 till FIIs return with fresh allocations

Traders carried forward bullish derivative bets on the Nifty to the January series on expiry of the December contracts on Thursday, as their worry about heightened turbulence in the market receded.

But the extent of rollover in the Nifty futures to the January series was lower than the previous expiry, suggesting market participants expect the mood to be relatively somber early in 2014 till foreign institutional investors (FIIs) return with fresh allocations.

Rollover in December futures of the Nifty to January was around 68 per cent against 72 per cent during the November series expiry. Total open interest in the index contracts, including those of January and February series, was slightly lower at about 1.99 crore units compared to the three-month average of 2.06 crore.  “The excitement surrounding rollover was missing this time. Though there was rollover of long positions, there were little fresh positions,” said Siddarth Bhamre, head-derivatives, Angel Broking.

Expectations of range-bound market moves reflected in the NSE’s Volatility Index (VIX), a measure of traders’ near-term perception of sharp moves in the Nifty based on options prices. The gauge fell to 14.88, the lowest since April 29, indicating options traders do not expect brisk movements or a decline in the markets in the near term.

“The comfort level in the market has gone up after the events like the US Federal Reserve’s decision to start with the tapering and the RBI’s decision to keep interest rates unchanged,” said Yogesh Radke, head of quantitative research, Edelweiss Securities.

The Fed announced the much-feared start of the rollback of its stimulus — Quantitative Easing (QE) but global markets took the news in their stride. FIIs have resumed their purchases of Indian stocks since the announcement on December 18. Indian markets were also relieved that the central bank did not raise policy rate contrary to expectations. “The positions taken by the FIIs quite clearly indicate an overall long-side bias in the market,” said Radke.

But, analysts expect the Nifty to continue trading in the range of 6,100-6,400 over the next couple of weeks. The index closed at 6,278.90 on Thursday. “When the Nifty approaches the 6,400-levels, there will be unwinding of long positions,” said Bhamre.

Rollover across futures contracts, including stocks and indices, to the January series was at 77 per cent against the three-month average of 75 per cent. In stock futures, the rollover to January was roughly 81 per cent against the three-month average of 79 per cent. Analysts said traders carried forward more positions in stock futures due to the rally in mid-cap stocks.