INSUBCONTINENT EXCLUSIVE:
After trading at a premium in the first-half, the March Nifty futures contract closed at a discount to the current month contract,
indicating that traders rolled over short positions to the next month, adding to the bearish tone of the market
The Corona virus outbreak to other parts of the world has roiled global markets.
The March futures contract closed at 11696.1, 1.9 points
below the February contract’s 11,698
The premium between the near month futures and next month is normally 35
Even if some companies with large promoter holding pay dividends to shareholders in March, the premium would narrow and not turn into a
discount, which has happened because of short rollovers.
At opening on Wednesday, the March contract traded at a 27.4 point premium to the
February contract.
“Normally, the Nifty next month futures contract trades at a premium of 35 to the near month contracts at the time of
But this time it is trading at a discount of 2
Even after adding the expected dividend of 16 points in March, the March futures have only 14 points of premium with February futures
This means the shorts are rolled into March series as well
The companies with high promoter holding are likely to announce early dividend in March before the new budget proposal,” said Amit Gupta,
derivatives head at ICICI Securities.
Rajesh Palviya, derivatives head at Axis Securities, also feels traders would have initiated short
positions in March, causing the contract to trade at a discount.
“The fears of Corona virus spreading are spooking global markets with an
impact on emerging markets, like India,” said Palviya
“The March contract traded at a premium (to February) during much part of the day but as fears of the Corona Virus spread to global
markets, the March contract ended at a discount.”
The range for the market in March is at 11,800-12,000, as indicated by the March Nifty
options at closing on Wednesday
The market closed below this level, at 11,678.5, and if the situation worsens because of global fears around the virus, analysts like Kunal
Shah of Indiabulls Securities and Rohit Srivastava, founder IndiaCharts, expect the Nifty to get support at 11,500-11,550.
The 11,550 level
is the 50 per cent technical retracement between the low of 10,670.25 on September 19 last year and the 12,430.5 on January 20, 2020
The 200-day moving average of 11,682.8 was breached but some analysts expect the market to get support and stage a short-term bounce.
