 "FIIs tread cautiously on hazy outlook")
Uncertainty over the rupee’s direction and expectations that the Nifty (the benchmark index of the National Stock Exchange) could firm up further might have prompted these investors to let their bearish positions in the benchmark’s futures in the June series expire, said analysts.
Rollover in the Nifty futures from the June to the July series was roughly 47 per cent as against 57 per cent when the May contracts expired. Total open interest -- the number of contracts not settled at the end of a day — in the Nifty futures on Thursday was roughly 12.8 million compared to 18.5 mn on May 30 (when May contracts expired), indicating less rollover of positions to July, compared to the previous expiry, said analysts.
“Clearly, FIIs have let their shorts (positions) expire, a contrast from the May expiry when they carried forward their long positions,” said Siddharth Bhamre, head-derivatives, Angel Broking.
FIIs had squared off a large portion of their long positions by the second week of June. They created fresh bearish bets after the market sentiment turned nervous in the wake of the decline in the rupee against the dollar. These investors simultaneously sold in the cash market worth about Rs 9,300 crore since June 11, resulting in the equity indices falling roughly five per cent till yesterday. Following the stock market rebound on Thursday, many FIIs did not carry forward their short positions. Analysts said the risk of the rupee declining further immediately, which would erode the value of their Indian holdings, also could have stopped them from taking fresh bets in the July series.
The build-up in Nifty options shows traders do not expect the index to cross 5,800 or 5,500 in the near term, said analysts. “There has been a lot of call writing at 5,800, which means this could act as the resistance. On the down side, there has been put writing at 5,500 and 5,600, which could act as the support levels. So, the Nifty could move between this level in the near term,” said Amit Gupta, head-derivatives, ICICIdirect.
The fall in implied volatility of Nifty options could have encouraged traders to write options aggressively, said analysts. The Volatility Index (Vix), which measures implied volatility and is a gauge of traders’ measure of near-term risks in the market, based on Nifty options prices, fell 10.5 per cent to 18.85 on Thursday. A fall in Vix shows options traders are less apprehensive about sharp movements in the market.
The market-wide rollover to the July series was at 78 per cent, almost in line with the previous expiries. “Most of the rollover in stock futures was in short positions,” said Bhamre.
Open interest in Bank Nifty futures on Thursday was about 1.18 mn units, almost unchanged from the build-up on May 30, the last day of the May contracts.