Tech futures stable despite cash segment meltdown

The drubbing received by technology stocks in the cash segment was not aptly reflected in the futures segment, where traders have been taking long positions.

Infosys futures, for instance, was trading at a premium of five to six points to the spot prices and there was not much shorting going on.

Ashok Das, head of derivatives at IDBI Capital Markets said, "There is support for the stock going forward as the broad feeling is that it will bounce back in the near future." The selling in the cash market was just an exaggeration.

Futures of Satyam, another frontline tech stock, was only at a few points discount to the spot prices. "Most of the pressure in the futures segment was largely owing to activity in the cash market, which had a spillover effect on the futures segment," Das explained.

The overall sentiment is however negative as the activity in the Nifty futures indicates. "Nobody is expecting the Nifty to bounce back in the near future," dealers said.

There is severe shorting going on in the index futures while at the end of the day the gap between the futures and the spot prices widened to around 19 points, after narrowing to around five points during the day.

In a single day Nifty open interest increased by 17.8 per cent (27 lakh shares) as traders took fresh short positions. "Traders have not reversed positions but have taken fresh positions," dealers said.

On the options side, Nifty calls have become cheaper, while puts are again exorbitant. In fact Nifty calls have declined by around 12 per cent. The implied volatility in puts has crept up to 28 per cent.

On the NSE's futures and options segment, turnover has shot up to close to Rs 10,500 crore, as index futures reported a turnover of around Rs 4000 crore and stock futures Rs 4600 crore.

There is very little buying in at higher levels as traders, who were long earlier, are buying at lower levels.