F&O Rollovers Hint At LimitedUpsidesinMay
Nifty faces stiff hurdle at 8000 as market is showing signs of fatigue, feel analysts
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.