Futures flashing signal that market rally may be near peak
son beginning with Tata Consultancy Services Ltd on Friday. Israel bombed part of the Iranian consulate in Damascus on Monday, killing seven military officers, after which Iran said it would retaliate at a time and place of its choosing. Most market analysts expect an attack over the weekend after Eid.
“A retributive strike over the next few days by Iran could spark a further rally in crude, which has crossed the $90 mark, strengthening the dollar and US bond yields, which could cause a pause in the Indian stock market rally,” said Chandan Taparia, SVP–head of derivatives and technical research at Motilal Oswal Financial Services. “That’s one of the key reasons retail and HNIs have hedged against likely downside risk . The other is the results season getting underway that could increase the volatility.”
Agreed U.R. Bhat, co-founder of Alphaniti Fintech, who said a “widening scope of the war could play havoc with crude prices” which have already risen since the past few weeks from $81 to past $90 a barrel. “Markets are anticipating a retaliatory strike over the weekend after Eid, prompting Client to hedge their portfolios by going short index futures,” said Bhat.
India imports around 85% of its crude requirement, and a rise in prices could widen the current account deficit and pressure the rupee.
Client positions have been tracked closely by analysts as their clout has risen since the covid pandemic. India’s demat accounts have grown from 40.8 million in 2019-20 to 151.4 million in 2023-24, signalling the rising participation of retail in the cash market.
Increasing demat accounts have also increased retail and HNI participation on the derivatives segment of the NSE, the world’s largest derivatives bourse by number of contracts. Their share as a proportion of gross turnover in equity derivatives on the NSE stood at 26.3% in 2023-24 (April-February), second only to prop traders (59.6%) but ahead of FPIs’ share at 5.9%. The Nifty hit highs on three consecutive sessions of 22,697.3 on 8 April, 22,768.4 on 9 April and 22,775.7 on 10 April.