Rollovers Likely to be Bet­ter than in April

The Economic Times - - Markets & Finance -

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.

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