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Derivatives traders carried forward bearish bets on the Bank Nifty, the widely traded banking index, to the next month, as investors continued to be concerned about asset quality in the sector.
Market participants said on Thursday (the expiry day for January series contracts), traders rolled over a large number of short positions on the banking index, compared to the benchmark Nifty.
“The open interest position in the Bank Nifty has been one of the highest in recent months. A large number of short positions have been built in, as investors are worried about asset quality issues in the sector. Also, markets have been correcting and banks have a huge weightage in the index,” said Siddharth Bhamre, head (derivatives), Angel Broking.
Traders were relatively more bearish in the public sector banking space, rollover data indicated.
Short positions continued to mount through the month, leading to subdued market performance, said analysts.
On Thursday, the Bank Nifty closed at 10,153, down 2.7 per cent from its previous close. The National Stock Exchange Nifty closed at 6,073, down 0.8 per cent. The Bank Nifty could see critical support at 9,800, analysts said. In January, the bank index declined 10.8 per cent, against a 3.6 per cent decline in the Nifty.
About 71.4 per cent of Bank Nifty positions were rolled over to the February series, following the expiry of the January series. Participants said open interest in the Bank Nifty was at a six-month high. Total open interest in the Bank Nifty stood at 18.5 million.
At 72 per cent, the rollover percentage for the Nifty was also high. For February, total open interest in the Nifty stood at about 15 million. However, open interest positions on the Nifty were at a three-month low.
“Investors were seen taking long liquidation positions on the Nifty, as they expected the Nifty to trade in the 5,900-6,300 range. Any movement towards 5,900 will lead to more long positions by investors,” said Amit Gupta, head (derivatives), ICICI Direct.
At 78 per cent, the rollover percentage for market-wide contracts was largely in line with that in the last three months, analysts said. Derivatives analysts believe despite the overall negative sentiment on the US Federal Reserve’s decision to taper its stimulus programme, foreign investors might not have aggressively built up short positions.
“Till now, foreign investors have not shorted in a big way. Through January, they were seen taking long unwinding positions. However, if they do start shorting positions, we could see a further downside in the market,” said Bhamre.
Rollovers across sectors remained high, with the banking sector seeing the highest rollover.
