Traders stay cautiously bullish on expiry

Roll-cost suggests some nervousness about corporate earnings, global concerns

Traders carried forward bullish bets on index futures during the expiry session of the July series derivatives segment on Thursday, while keeping a close watch on corporate earnings numbers and the potential for turmoil in global markets.

According to analysts, the July series rollover by traders in the Nifty futures at 66 per cent was strong and indicated good interest among foreign portfolio investors.

“The most significant build-up this month was an increase in FII (foreign institutional investors) net long positioning in index futures, with net long positions increasing to 450,000 contracts during the month. A strong rollover of this position would point to continuing strength in the coming month,” said S Hariharan, head - sales trading (institutional equities), Emkay Global Financial Services.
 

Signs of some caution were visible in the roll-cost. “Market-wide positions witnessed strong rollover with 79 per cent positions getting rolled but the roll-cost during the July series was 55 basis points (bps), compared to the usual 75 bps indicating lack of aggression from the long rollers. Traders are still concerned on the current lacklustre corporate earnings and domestic as well as global economic concerns but wish to hold onto their current positions,” said Yogesh Radke, head of quantitative research, Edelweiss Securities.

The Nifty futures open interest (OI) value in the July series, at Rs 14,400 crore was higher than the rollover value seen during the June series, which stood at Rs 12,300 crore.   

Market-wide position roll-overs were seen at 79 per cent, also higher than the previous month as was OI in value terms at Rs 18,000 crore.



On Thursday, benchmark indices traded in the green following cues from global markets encouraged by a no rate-hike announcement from the US Federal Reserve which concluded its two-day meet on Wednesday in the US. Higher interest rates in the US would have increased the cost of capital for foreign institutions. Some believe that this could have led to outflows from emerging markets such as India.

After the Fed decided to leave rates unchanged, the BSE Sensex ended the day up 142 points, or 0.5 per cent, to close at 27,705. The NSE Nifty closed up 47 points, or 0.6 per cent, at 8,421.

Analysts believe that Indian stocks might continue to gain from the turmoil in Chinese markets, as commodity prices have also softened in light of weakening demand from China. India is a net importer of commodities, and stands to benefit from lower prices. Stocks in sectors such as auto gained on account of optimism over commodity prices, experts said.

“Rollovers have been largely in line with the last three months... Tech and energy names have had strongest roll momentum this month, and appear candidates for strength in the coming month,” said Hariharan.

The Bank Nifty also saw good rollovers, at 77 per cent, but the laggards in the sector were state-owned banks and some big private lenders such as Axis, HDFC and ICICI Bank on concerns of weakening asset-quality, analysts said.