Markets ease after F&O expiry

The stock markets breathed a sigh of relief on Thursday with the expiry of futures and options (F&O) contracts and smooth rollover in the derivatives segment.

The market showed greater resilience and bounced back from early lows to end trade with a gain of 93 points on the Sensex.

The 30-stock benchmark index closed trade at 10,666, with positive sentiment enveloping the markets after the exchanges announced a drastic cut in margins on Wednesday.

Though trade began on a weak note with the Sensex dipping 298 points to its intra-day low of 10,275, it recovered its losses and even rallied smartly to end the day in the green, gaining 0.88 per cent. The NSE Nifty also recovered by 62.15 points (1.99 per cent) and closed at 3,177.70.

Institutional investors and operators were engaged in short-coverings on the last day of May derivatives contract.

"The decision of the BSE and the NSE to reduce exposure margins in the cash and derivatives segment by half with immediate effect eased the liquidity pressure on brokers and we should see more active participation in the derivatives segment going ahead," said a broker.

Analysts said after the F&O expiry, the global emerging market scenario would determine the market's direction in the next few days.

"Going forward, triggers for the stock market would be behaviour of emerging markets, metal prices and the monsoon. If the negativity in the global markets subsides, the Indian equity market could bounce back and recover part of the losses," said Deepak Jesani, head of retail research, HDFC Securities.

"The high volatility in the past few weeks was due to F&O pressure and FII activity. Though the F&O contracts have expired, the FII activity will determine the extent of volatility in the next few days which, in turn, would depend on the emerging markets scenario," a fund manager added.

Being the last day of F&O contracts, on Thursday was relatively a less volatile day as most of the liquidation of positions had already taken place in the past few days.

"We do not see any dramatic reversal of trend, but it is clear that delivery-based buyings have started.

The key to the market movement was expiry of F&O contracts and though rollover is relatively less compared to earlier months, it will at least arrest downfall in the coming days," pointed out the broker.

On Thursday's rally was well supported by a sharp rebound in metal prices during the day after the overnight crash on the London Metal Exchange.

The Asian markets, however, witnessed a weak trend. The Nikkei ended down by 213.15 points, the Hang Seng by 125.77 points and the Singapore ST Index by 32.10 points.

The BSE FMCG index rallied 3 per cent to 1,992, and the Metal index gained 2.5 per cent at 8,579. The Bankex and Healthcare index, however, dropped 1.5 per cent each to 4,942 and 3,445, respectively.

Among individual stocks, Wipro zoomed nearly 7 per cent to Rs 484, TCS rallied 4.6 per cent to Rs 1,875 and Bharti Tele rose over 6 per cent to Rs 393. HLL and ITC gained nearly 4 per cent each to Rs 237 and Rs 181, respectively. ONGC was up 3.3 per cent at Rs 1,204.

Market breadth was fairly negative on the BSE "" out of 2,483 stocks traded, 1,523 declined, 905 advanced and 55 remained unchanged on Thursday.