F&O Rollovers Hint At Limit­edUp­sidesinMay

Nifty faces stiff hur­dle at 8000 as mar­ket is show­ing signs of fa­tigue, feel an­a­lysts

The Economic Times - - Companies: Pursuit Of Profit -

Mum­bai: Should in­vestors brace for a cor­rec­tion in the stock mar­ket? Rollover of fu­tures con­tracts to the May de­riv­a­tives se­ries on ex­piry of the April con­tracts on Thurs­day was higher than the last three months’ av­er­age, but traders paid a lower cost for car­ry­ing for­ward the po­si­tions. An­a­lysts said the lower cost of rollover sug­gests traders are ex­pect­ing lim­ited up­sides or even a de­cline in the near-term.

Bench­mark in­dices fell 1.8% on Thurs­day, track­ing the sell­off in global mar­kets af­ter the Bank of Ja­pan did not cut rates fur­ther, con­trary to ex­pec­ta­tions. The Sen­sex fell 461 points to close at 25,603.10. The Nifty closed at 7847.25, down 132.65 points. The Nifty ended be­low its 200-day mov­ing av­er­age of 7,856.

An­a­lysts said the Nifty faces a stiff hur­dle at 8000 as the mar­ket shows signs of fa­tigue af­ter the 12.3% run-up in the in­dices since March 1 this year. “We have seen a good move for two months so some amount of cool-off to 7400 lev­els can be there. On the higher side, 8000 would be a near-ter m re­sis­tance,” said Yo­gesh Radke, head of quan­ti­ta­tive research at Edel­weiss Se­cu­ri­ties. “The roll cost was lower at 50 ba­sis points com­pared to the 60 ba­sis points ave r a g e o f l a s t c o upl e o f days which in­di­cates short side ag­gres­sion”.

Half of the Nifty gain got wiped off in the sell­off on Thurs­day and the in­dex ended the April se­ries with a gain of 1.4%. Strong rollovers were seen in fer­tilis­ers, FMCG and phar­ma­ceu­ti­cal com­pa­nies, while traders car­ried for­ward lesser po­si­tions in metal and IT stocks.

At 74%, rollovers to the Nifty May fu­tures were higher than the av­er­age of 67% and mar­ket-wide rollovers at 81% were slightly higher than the av­er­age of 77%.

The May se­ries will start with mar­ket wide fu­tures open in­ter­est of ₹ 74,700 crore, higher than ₹ 69,600 crore at the be­gin­ning of the April ex­piry. The Nifty will start the new se­ries with open in­ter­est of ₹ 16,500 crore, higher than ₹ 15,800 crore at the start of the April se­ries.

“The medium-term out­look re­mains pos­i­tive as of now but for the short term we are ex­pect­ing some con­sol­i­da­tion which should be used to ac­cu­mu­late strong front­line stocks,” Sa­haj Agrawal, AVP-de­riv­a­tives at Ko­tak Se­cu­ri­ties said.

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