Street Sees High Rollover to Mar, Inflows Likely to Support Indices
Rollover of Nifty futures to the March series at 73%; market-wide open interest at an all-time high
Mumbai: March is likely to be a month of uncertainty for the stock marketwiththeUSFederalReserve meeting to decide on rate increases and results of various state electionsdue.But,thatdidnotstoptraders from carrying forward record positions to the March futures and options series (F&O) on expiry of February contracts as the Nifty hit hit 52-week high on Thursday.
Rollover in Nifty futures to March was 73%, higher than the threemonthaverageof 69%.Themarketwide rollovers at 77% were in line with the average. The market-wide open interest of ₹ 1.08 trillion on Thursday was an all-time high and the open interest of 27 lakh contracts in the Bank Nifty was the highest since July 2010.
“Market-wide open interest is at the highest level ever indicating huge leverage positions in the market. Since the market is over-leveraged, any negative newsflow can lead to a knee-jerk fall,” said Yogesh Radke, head of quantitative research at Edelweiss Securities.
On Thursday, the indices rose 0.1% to close at a five-month high. The Nifty scaled a 52-week high of 8,982.15 and the Sensex crossed the 29,000-mark for the first time since
September 8. The closing level of 8,939.5 for the Nifty was the highest a series has expired at since January 2015. Nifty’s open interest onThursdaywas ₹ 20,200crorecompared to ₹ 16,500 crore when the January contracts expired.
Since positions are on heavier side and Nifty is near the resistance of 9,000, a correction could be on the cards. “9000 will come but it will be tough to sustain. Risk reward is not favourableasthemarkethasrallied sharply from the lows even as the overall trend is positive,” said Chandan Taparia, derivative analyst, Motilal Oswal.
BJP’s performance in the state electionswillbeatestof thegovernment’s popularity and if the US Fed raises rates in March and signals more over the next, that would weigh down market sentiment.
However, continued liquidity sup- port from DIIs will prevent a big fall in indices, analysts said. Nifty Marchoptionsdatashowedhighest concentration at 9,000 strike among call options and at 8,500 strike amongputoptionsfollowedby8,800 strike. “If everything goes fine, market can go to 9,200. The lower volatility period will continue and corrections may not be too large,” said Amit Gupta, head of derivatives, ICICIdirect.