Fewer derivative positions had been carried forward to the February series when the January contracts expired on Thursday as traders and investors did not rollover short positions. Analysts said expectations that the market may strengthen in the run-up to the Union Budget prompted traders to square off their bearish bets.
Rollover in Nifty contracts to February was approximately at 64%, below the three-month average. In Bank Nifty contracts, the rollover was roughly at 67%, below the six-month average.
“Bears may not have rolled over their shorts positions hinting that the current momentum may continue,” said Shshank Mehta, derivative strategist, Shah Investor’s Home.
Benchmark indices ended weak on Thursday but posted 2.4 per cent gains in January aidedby foreign institutional inflows to the tune of $3.90 billion during the month. In 2012, these investors poured about $25 billion into Indian equities.
The Sensex fell 110.02 points or 0.55% to close at 19,894.98 on Thursday. The Nifty declined 21 points or 0.35% to end at 6,034.75. Foreign institutions net bought shares worth Rs959 crore on Thursday, while their domestic counterparts were sellers to the tune of Rs863.60 crore, according to provisional data.
Brokers said traders rolled over bullish positions in cement and auto, while they were forced to carry forward their short positions in public sector bank futures. Analysts said traders, who had created short positions in public sector bank futures, were caught on the wrong foot after Punjab National Bank’s third quarter earnings exceeded estimates.
“PNB results were surprisingly strong with healthy margin performance and stable asset quality. With the street being pessimistic going into the results, the stock posted a substantial gain,” said Amar Ambani, Head of Research, IIFL. “The investment sentiment for the banking sector was also ably supported by robust performance by ICICI Bank and asset quality improvement reported by UBI and Allahabad Bank,” he said.
Analysts said Bharat Heavy Electricals Ltd (BHEL) saw rollover of long positions to the February series as the stock rose 2.4% to Rs 227.70 on Thursday.
“Rolls in BHEL were interesting and were skewed towards the long side. A decisive close above 231 will catapult the counter to 250 levels,” said Mehta.
Traders rolled over fewer contracts in Infosys to February because they allowed most of the
short positions to expire in the January series itself. Infosys shares ended marginally lower at Rs 2,788.75 on Thursday.
“We believe the stock is heading towards 2900 where concentration in calls is the highest,” said Mehta.
Analysts said the lower position build-up gives room for traders to build positions ahead of the Union Budget later this month. As the event approaches, traders are likely to mount bets on specific stock futures that could see some sharp moves.
“If the open positions had been heavy during the start of the series, it would have given very little room for traders. Also, it would have made the market more vulnerable to any sharp declines in the absence of sizeable short positions,” said the head of institutional derivatives of a Mumbai-based broking firm.
