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Hazy market prospects prompted Dalal Street traders to carry forward fewer futures and options positions to the September series on Thursday on expiry of the August contracts. Analysts said uncertainty about the rupee’s direction, which played a key role in setting the tone for the markets in August, had led to the rollover percentage fall below the three- and six-month averages. But the weaker rupee resulted in higher rollovers in futures contracts of software exporters and select drug makers, outperformers in August because of the decline in the Indian currency.
The rollover in Nifty contracts to September from August was at 52 per cent. The three-month average rollover in Nifty was 60 per cent and the six-month average rollover was 59 per cent, according to Shshank Mehta, derivatives strategist, Shah Investor’s Home.
“The rollover this expiry has been low because many traders who had long positions early this month let their positions expire and booked losses,” said Ashish Chaturmohta, head-technical and derivatives research, Fortune Equity Brokers. “But the low base could help the Nifty go up to 5,500 in the near term,” he said.
The Nifty, which closed at 5,409 on Thursday, has fallen close to 8.5 per cent from July 25 (when July contracts expired). But for the strength in frontline software exporters such as Infosys and Tata Consultancy Services, some drug makers, Reliance Industries and Cairn, the fall in the indices would have been sharper. Hopes of continued strength in these stocks have encouraged traders to carry forward bullish bets in their contracts.
In Bank Nifty futures, the rollover to September series from August was above recent averages, but majority of the positions carried forward are bearish bets. Mehta said the rollover in Bank Nifty contracts was 70 per cent compared to the three- and six-month averages of about 61-62 per cent. Bank Nifty’s open interest for the September series was 2.1 million units compared to 1.8 million shares during the previous expiry.
“Some large traders, including FIIs (foreign institutional investors) are clearly betting on a further drop in banks going by the positions built in September,” said the head of derivatives with an institutional broking firm.
Deutsche Bank believes banks’ valuations are now ‘extremely attractive’, even adjusting for a ‘very bleak’ outlook. “While the environment is extremely challenging and uncertain, the stock valuations reflect that. The recent corrections (20-50 per cent) in stock prices have made valuations extremely attractive for long-term investors willing to look beyond the near-term mayhem,” said Deutsche’s Manish Karwa and Manish Shukla in a client note.
