The Hindu Business Line : Traders reluctant on fresh short positions

Chennai, March 13 Markets succumbed to selling pressure, continuing the decline that began on Wednesday afternoon. The securities in the derivative segment of the National Stock Exchange opened with a downward gap, in line with other Asian markets, and the selling intensified as the day progressed.

Nifty near month futures opened with a downward gap of 143 points. The future underwent a relentless selling pressure through the day and it declined to an intra-day low of 4555 before closing at 4609; with a loss of 5.3 per cent. The discount to the underlying was surprisingly low at 16 points at close, indicating that traders were reluctant to initiate fresh short positions.

Limited downside

This could be perceived as a positive since traders could be betting that the downside was limited from these levels. Secondly, the fact that the index was near its January lows could also have led to moderation in short sales.

Volumes were moderate at Rs 44,870 crore. Forty two per cent of the turnover was in index futures while stock futures made up 37 per cent. Index options recorded the highest turnover in February at Rs 7,696 crore. This could be due to portfolio hedging done by institutional investors. The open interest in the Nifty near month futures gained 9 per cent while the Nifty April futures gained 8 per cent in Thursday’s trading.

The broad based selling and the negative sentiment prevailing on the bourses ensured that very few futures closed with a positive cost of carry. The few stocks that closed at a premium to their underlying were Redington India, Hinduja Ventures, Global Broadcasting Network and MphaSis. Stock futures that traded at a large discount to their underlying price were Jammu and Kashmir Bank and National Aluminium.

There were, however, one section of investors who were utilising the weakness in the market to add to their position in the derivative segment. Some fundamentally strong stocks such as DLF, Bajaj Auto and Power Grid Corporation witnessed increase in open interest. However, many stocks from the financial sector such as State Bank of India, Jammu and Kashmir Bank and Bank of India shed open interest.

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