Nifty tanks 26% in March series; worst expiry since October 2008

The 25-per cent fall in the benchmark index Nifty 50 index led by interest rate sensitives has made the expiry of futures and options (F&O) series for March 2020 the second worst in history. At its worst, the Nifty 50 had lost around 34 per cent in October 2008 during the global financial crisis.

In the March series, Nifty 50 index lost 25.7 per cent to close at 8,641 points on Thursday. Nifty Bank, Nifty Fin Services, Nifty PSU Bank, Nifty Realty and Nifty Auto indices skidded in the range of 29 per cent to 35 per cent during the series.

“This series was almost similar to the one seen back in October 2008 when the Nifty had cracked 34 per cent. For the Nifty Bank, however, the March F&O expiry has been the worst ever with a fall of around 24 per cent. In the last 10 days, we have shed around 140 crore shares open interest in stock futures. So even if the markets were moving up since the past few days, investors were sitting on light positions. They were either covering shorts or liquidating longs. At the starting of the April F&O series, the open interest will be the lowest since the last five years,” explains Nandish Shah, a technical and derivative analyst at HDFC Securities.

Of the 143 stocks from the F&O segment, 10 have seen their market price more than halve in the March F&O series. The list includes IndusInd Bank, Indiabulls Housing Finance, Equitas Holdings, Tata Motors, Ujjivan Financial Services, Mahindra & Mahindra Financial Services, Axis Bank and Federal Bank. Moreover, 81 other stocks declined between 26 per cent and 50 per cent during the period. However, Hindustan Unilever, Cadila Healthcare, Dr Reddy’s Laboratories, Biocon, Torrent Power, Nestle India and Cipla have bucked the trend and outperformed the market by falling less than 10 per cent.

Given this backdrop, analysts are positive about the market--at least in the short term. A K Prabhakar, head of research at IDBI Capital, for instance, expects the Nifty to scale up to 9,500 in the April series if the news flow remains positive.

“One must realise that the Nifty has gained over 10 per cent from the recent lows, which is a positive signal. The government on its part is taking the right steps. All this should boost investor confidence,” he said.

Shah of HDFC Securities, too, echoes a similar view. Since the positions are light, he expects the Indian markets to do well on a relative basis even if the global indices were to falter. Meanwhile, foreign portfolio investors (FPIs) has sold net of Rs 60,557 crore ($8.2 billion) during the period.

“We began the march F&O series with the long-to-short ratio of 0.14, which means 85 per cent were shorts in the system and only 15 per cent were longs. It has reversed now and the ratio has already crossed 1. So, while the markets had been falling (spot market), FIIs had been building positions in the F&O segment,” Shah said.