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The stage might be set for the proverbial bull-versus-bear battle over the next couple of weeks, if the trends in the derivatives rollover to the August series on expiry of July contracts are an indicator. Traders, both optimists and pessimists, have mounted bets in the August series that could result in heightened volatility in the days ahead.
Analysts said this was reflected in the increase in the rollover of contracts from the June series to August, compared to the previous expiries.
The rollover in Nifty futures from the July series to the August one was about 76 per cent, against 47 per cent when the June contracts expired. Rollover across contracts also stood at about 76 per cent. The rollover was higher in percentage terms and open interest build-up, compared to the previous series’ expiry.
Though bets have been more or less even, analysts say bullish traders hold an upper hand. “Strong hands such as FIIs (foreign institutional investors) are holding the long positions. If the market moves up, it would force the weaker hands to cover the short positions,” said Siddarth Bhamre, head-derivatives, Angel Broking.
The sell-off on Thursday did not deter traders from rolling over long positions. The benchmark indices fell about 1.4 per cent each, led by shares of consumer goods companies, which were dragged down after ITC posted lower-than-expected earnings. The Sensex fell 285.92 points, or 1.42 per cent, to close at 19,804.76; the Nifty dropped 83 points, or 1.39 per cent, to close at 5,907.5. The slide in the indices, which were trading marginally weak earlier in the day, was steep due to “expiry-related” selling, said analysts.
Brokers said the bullish bets in August were due to anticipation the rupee might not dip further because of recent moves by the Reserve Bank of India (RBI). Pessimistic traders feel the worst might not be over.
Analysts said traders rolled over long positions in Nifty futures, despite higher costs. “The roll cost was 35-37 points on Thursday (average roll cost is 17-18 points), showing traders expect the markets to rally in the short term,” said Amit Gupta, head-derivatives, ICICIdirect. The Nifty was expected to move in the range of 5,800-6,300, he said.
Rollover in bank Nifty futures contracts to the August series was about 57 per cent, in line with previous expiries. But the open interest build-up in these contracts was higher. Analysts said the rollover in bank Nifty futures had mostly been short positions, as the outlook for the sector had turned hazy, following RBI’s recent moves to tighten short-term liquidity.
Gupta said traders carried forward long positions in futures contracts of the so-called defensive sectors such as pharmaceuticals and consumer goods, along with information technology. The rollover of short positions was mostly in sectors such as capital goods, metals and cement. Among stocks, Reliance Industries and Bharti Airtel saw rollover of short positions. Analysts said contracts of large-cap shares had seen a build-up in positions because of the ongoing results season, which would end by the month-end.
