Markets edgy ahead of F&O expiry, Budget

Ahead of the expiry of February futures and the Budget that is expected to be populist, markets will continue to be edgy even as the build-up of rollover positions is yet again extremely low.

Reliance Power's share ratio for the bonus issue to be decided on Sunday will further determine the direction of the power pack and may affect the market sentiment.

Power stocks have fallen by as much as 4.4 per cent since Reliance Power got listed on February 11. The Bombay Stock Exchange's (BSE) benchmark index, the Sensex ended at 17,349.07 points, down 2.17 per cent or 385.61 points on Friday. The benchmark index has fallen by 766.18 points or 4.23 per cent in the last one week.

The market-wide rollover continues to remain weak, with merely 25 per cent index futures and 22.42 per cent stock futures being carried forward.

The presentation of Budget proposals by the finance minister on February 29 is widely expected to be populist with only minor changes expected by the market.

Of the Nifty futures open interest of Rs 24,215 crore, Rs 5,550 crore has been rolled over and of the open interest of Rs 35,995 crore in stock futures, Rs 8,069 crore has been rolled over.

In fact, the trend was similar on January 25 as well ahead of the expiry of the February series. It was only in December that January futures had witnessed a robust 33 per cent rollover of Rs 98,272 crore, at least four trading days before the expiry of the December futures.

Rollovers in Nifty futures contracts was 40.95 per cent or Rs 9,748 crore while stock futures witnessed rollovers worth Rs 22,585 crore or 30.5 per cent.

Moreover, foreign institutional investors (FIIs) have sold a net of Rs 4,009.46 crore in February alone so far "� a case of reverse arbitrage, where FIIs are buying in futures and selling in the cash market.

Consequently, the Nifty futures discount has reduced from 30.70 points to 9.70 points. Domestic institutional investors (DIIs) have not succeeded in supporting the market at these levels, having bought equities up to Rs 1,996.96 crore.

"To meet the twin objectives of increasing compliance as well as revenue, P Chidambaram first introduced the Securities Transaction Tax or STT in his FY04 Budget. We would not be surprised if these rates are increased marginally and the scope widened. But, we expect the agricultural sector to remain out of the tax net and do not see any cut in subsidies either. All in all, Budget 2008-09, in all likelihood, will be politically correct and populist," said Shahina Mukadam, head, equity research, IDBI Capital.