The Hindu Business Line : Roll-over of positions to July contracts improve

While the discount between the June Nifty contracts and the spot Nifty narrowed down sharply during the week to just about four points, the discount was still quite high for Nifty July contracts by over 25 points.

THE activity at the derivative segment on the NSE picked up slightly ahead of the settlement week for June contracts.

The average daily turnover in the F&O segment improved to Rs 6,892.8 crore for the week as against the previous week's figure of Rs 6,199 crore.

Nifty movement: The S&P CNX Nifty ended this week also in negative territory with a loss of 1.1 per cent from the previous week close. It moved in a tight band of 1525.20-1474.5 points and closed the week at 1491.20.

Index futures: The near-month Nifty June contracts closed the week at 1487 points; open interest positions slipped to 53,936 contracts from last week open positions of 57,596 contracts.

On the other hand, the Nifty July contracts added about 7,180 contracts during the week and closed at 1466.

The farther-month August contracts witnessed little activity and settled the week at 1457.50.

Much cannot be read into the narrowing down of gap between the June contracts and spot index, as only four days are left for the settlement of the June contracts.

The spot and future price tend to converge on the day of settlement.

The gap between the spot and future price continued to witness a volatile swings; The June futures' discount was narrowed down to as low as about two points on Thursday which again widened to about four points on Friday. A similar trend was witnessed on July contracts as well.

However, the rolling over of open positions from June contracts to July series was on the higher side.

Sentiment indicators:

Implied volatility: The IV for both call and puts declined for Nifty contracts and for both Nifty calls and puts, it stands at 38 per cent.

The decline in the puts and calls implied volatility indicates that traders are not willing to take any risk on either side of the market.

Put/call ratio: Though the put/call ratio for Nifty contracts declined, at 0.71 the ratio is still higher, pointing to a bearish outlook for the markets.

Outlook: Volatile swings between futures and spot and a sharp drop in implied volatility (for both puts and calls) may ensure the market is still in volatile zone.

Note: Trading volumes at the market are low, which means that the above indicators do not reflect the true picture of the market pulse. So, traders may remain on sidelines.

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