Stock Market

F O rollover hints volatility to continue, Nifty hits 4-month low

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Traders carried forward bearish bets to the March derivatives series as the stock market could remain on shaky ground because of continued worries over Covid-19 outbreak turning into a world-wide pandemic.

With benchmark indices hitting four-month lows on Thursday, expiry day of the February series, analysts expect a bounceback, but fear any renewed strength could be short-lived. Nifty rollovers on expiry day stood at 69 per cent on provisional basis, higher than the February series figure of 66 per cent, said analysts.

“Short positions created by FIIs during the series have been rolled over to the next month and fresh short positions have been added in the new series,” said Amit Gupta, head of derivatives at ICICIdirect. Indices extended losses to the fifth straight day on Thursday with the Nifty index ending down 45 points, or 0.4 per cent, from the previous close at 11,633.30.

The Sensex slid 143 points, or 0.4 per cent to 39,745.66.

However, they ended off their session lows of 1 per cent. “There are more chances of downside than upside.

Any bounce-back to 11,700-11,800 is likely to be sold off and we are cautious on the market for the next series,” said Yogesh Radke, head of alternative and quantitative research at Edelweiss. Foreign investors offloaded Indian stocks worth Rs 3,127 crore on Thursday, taking their total sales tally to almost Rs 10,000 crore in the past four days.

Domestic institutional investors continued their shopping spree, buying stocks worth nearly Rs 3,500 crore on Thursday. The volatility index — India VIX — which measures market’s perception of risk in near-term, surged 26 per cent during the expiry week. “The India VIX moved up by 5.7 per cent in the February series and went up sharply in the expiry week, which could continue,” said Chandan Taparia, derivatives analyst at Motilal Oswal. The spread of Covid-19 outside China has raised concerns about its impact on global growth, leading to foreign investors dumping riskier assets like emerging market equities. Even though the Nifty fell below 11,550 on Thursday, put writers were holding positions which indicates that there is possibility of a bounce-back to 11,750, but it will remain a ‘sell on rise’ market, said analysts. The 11,800 strike holds the highest open interest among Nifty put options, followed by the 11,700 strike.

The 12,000 strike holds the highest number of open positions among Nifty call options expiring March 26. Analysts say Nifty March futures being at a discount to the spot price, despite factoring in dividends by companies during the month, also indicates bearishness in the market.

Nifty March futures closed at 11,618.8 on a provisional basis, at a 14.5 per cent discount to the spot index.

“If it fails to surpass 11,777, then it may continue its weakness towards 11,533 then 11,430-11,333 zones,” added Taparia.




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