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Caution seems the market guide as the election results day draws closer. Investors seem content with booking profits in the derivatives segment, while churning portfolios in the cash segment.
Open interest (OI, meaning, contracts not settled) in the derivatives segment, an indication of the risk-taking ability of investors, has come down, said analysts. At the time of expiry of the April derivatives segment, the OI was at 16 million shares; this has come down to about 13 mn, said experts in the segment.
“The drop indicates uncertainty in the market is so high that participants are avoiding taking huge bets on either direction in the Nifty. They are just looking at building positions on a news flow basis,” said Sahaj Agrawal, deputy vice-president (derivatives research), Kotak Securities.
News flows drove equity markets on Wednesday as the markets fell sharply as rumour of a decline in the US Federal Reserve's buying programme and concerns about the Bharatiya Janata Party's (BJP's) prime ministerial candidate breaking the Election Commission of India’s (EC) model code of conduct.
The BSE's benchmark Sensex intra-day dipped close to 400 points before ending the day flat, down 0.2 per cent at 22,417. The National Stock Exchange's Nifty benchmark ended at 6,696 down 0.3 per cent from its previous close. India VIX, the volatility index, was down 1.5 per cent on Wednesday, closing at 30.5.
Analysts said with a BJP victory fully factored in by the market, investors were playing it safe by hedging their positions. Foreign institutional investors (FIIs) had been selling index futures in the market for the past two sessions.
“FIIs have been buying all along since the 5,800-5,900 levels…they are also looking to take some profits off the table, by buying in the cash market and selling futures,” said Vivek Mahajan, head of research, Aditya Birla Money.
Market rumours about the US Fed increasing the pace of its bond-buying tapering programme to $20 billion a month from $10 bn currently, spooked market participants. The bigger worry was said to be the EC ordering registration of a police case against Modi for flashing the BJP party symbol and making a ‘political’ speech outside a polling booth in Ahmedabad.
“Markets were worried about the criminal complaint against Modi and the rumour that he could go to jail for two years for violating the poll conduct code. But the clarification issued later helped calm the markets, which pulled back a bit in the end,” said Nirmal Rungta, director and head (private client group), CIMB Securities.
Pain in the mid-cap and small-cap segments was more. Some prominent names which declined by more than five per cent include DLF, Jaiprakash Associates, GVK Power and Adani Power. The remaining two Adani stocks also suffered, with Adani Enterprises shedding about 3.6 per cent and Adani Ports falling 1.8 per cent.
FIIs were net buyers of Indian equities at Rs 454 crore for the day, showed exchange provisional data. Domestic institutions were net buyers by Rs 6 crore.
Market watchers said investors had been churning their portfolio. Stocks of the automobile sector, on a decline, were up on Wednesday. Hero MotoCorp, Tata Motors and Mahindra & Mahindra were among the top performers among the Sensex30 stocks.
The BSE realty sector declined by 5.3 per cent, followed by the consumer durables, power and capital goods sectors, down two per cent each.
