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Traders and investors today carried forward fewer bearish derivative bets to the May series when the April contracts expired, compared to previous occasions. Analysts said a sizable chunk of the short positions in stocks in the April series were allowed to expire due to uncertainty about the market’s near-term prospects, resulting in lower-than-average rollover of the past three months.
About 70 per cent of stock futures contracts in the April series were rolled over to May, compared to the three-month average of about 78 per cent, according to provisional data provided by analysts. The rollover was higher in Nifty futures at about 60 per cent, higher than the three-month average of 53 per cent, the provisional data said.
“A lot of shorts were not rolled over because there is lack of clarity on where the market is going,” said Ashish Chaturmohta, head- technical & derivatives research, Fortune Equity Broker.
The relatively modest position build-up in strikes of Nifty options such as 5,800 and 5,900, near the current levels as compared to the previous occasions, shows traders were hazy about the market direction, said Chaturmohta. The Nifty rose 79.4 points or 1.4 per cent to close at 5,916.30 today.
Foreign institutional investors did not roll over their short positions in the Nifty to the May series to the extent seen in March and April, said Amit Gupta, head-derivatives, ICICIdirect. “This means there is a feeling that the Nifty will spend some time around this area, with 5,730 as the support,” he said.
Analysts said traders and investors squared off their short positions in several stock futures which they had created as a hedge against their share portfolio in case the fourth quarter results disappointed. In the past three days, several stock contracts presented reverse arbitrage opportunities because futures were trading at a discount to the share price in the cash segment. In reverse arbitrage, a share whose value is higher than that of its stock future is sold, while the stock future is bought simultaneously. When the contracts expire, the values converge, resulting in the sold shares being brought back and the stock futures contracts being sold off.
Among sectors, rollover was highest in the pharma, real estate and capital goods contracts. Fewer contracts in oil and gas stock futures were carried forward as short positions expired. Analysts said traders rolled over long positions in pharma stocks and short positions in metals.
