Rollovers Likely to be Better than in April
After witnessing a rally the pre-election phase and on the election-verdict day, the Indian equity market witnessed yet another fantastic trading session on Monday, but this time midcap and the small-cap stocks which joined the party. The rally was backed by supportive volumes and a rise in OI for individual stocks (OI for indices). Post the strong mandate, the market has witnessed two major things: a) change in sector allocation, where investors and traders shifted from defensive names to high beta beaten-down space and b) IVs have dropped down significantly for indices but remain at elevated level for specific stocks, indicating a shift in activity towards individual stocks. We see IVs being at the higher end for stocks like DLF, JP Associates, Unitech and ADAG group stocks.
The market may take some time to fully discount the election news and could remain volatile during the first few days of the current week. Our market has ignored global market movement in the past 1-2 months. This trend could last for few more trading sessions. PCR at 0.73 levels is near its trough zone. FIIs have been net seller in index and stock futures in the previous few trading sessions. This could be attributed to hedge against their recent cash buying.
Nifty futures over the past two trading sessions has jumped around 2% with a rise of around 30% in total OI. We believe most of the recent addition in OI is likely to be rolled over to the next series. Thereby, rolls for this month could be better than in April.