Rollover points to slight build-up of longs

KS Badri Narayanan Chennai | Updated on March 30, 2020 Published on March 30, 2020

Brokerages caution higher intraday volatility

As foreign institutional investors (FIIs) continue to press the sell button, rollover of positions in derivatives sank to a three-month low for both index and stock futures. The rollover in Nifty was at 62 per cent against the three-month average of 69 per cent, while for Bank Nifty, it stood at 55 per cent (64 per cent).

The strict margin rule imposed by SEBI and short-covering towards the fag end of the series resulted in unwinding of short positions.

According to Angel Broking, in the index futures segment, FIIs began the March series with a Long Short Ratio of around 12 per cent and were net short for most part of the series. However, in the last one week, they covered some of their short positions and even formed marginal longs due to which the indices witnessed a sharp pullback in the last three sessions to close the series above 8,600.

“This indicates that much of the short positions formed have been covered and have not been rolled over to the April series,” the broking house added.

FIIs’ Long Short Ratio in the index futures segment is now at 29.63 per cent, and these are light on positions.

Motilal Oswal Financial Services said unwinding was seen mainly due to the new rule to curb volatility and short-selling in the market.

“The ongoing fall was majorly led by sharp selling from FIIs’ desks as they remained net sellers in the cash market segment in all trading sessions of March series and cumulatively sold equities worth ₹60,192 crore, which is their biggest selling figure in a month in the last 13 years,” it added.

“Looking at the recent activity, the market direction going ahead will be determined by how fresh positions get formed in the next few sessions,” said Ruchit Jain, Equity Technical Analyst, Angel Broking.

“Until we see a significant cool-off in the implied volatility (IV), the range for the index will continue to be high, and hence, traders are advised to properly manage the risk and book profits as we approach the higher end of the range,” he added.

India VIX is still above 70 levels indicating a bear grip and the possibility of the volatile swing continuing in the market, MOFSL said in the note.

“Nifty’s intraday movement of 400-500 points swing could be the new normal in such a kind of scenario till volatility cools off from its historical 11-year high. As of now, the index is light on positions and further build-up will decide the future trend in the market,” it added.

Bank Nifty also started correcting from the initial days of March expiry and continued its negative momentum for the major part of the month.

Some banking counters such as IndusInd Bank, Axis Bank, Federal Bank, RBL Bank, Canara Bank and SBI witnessed severe selling pressure. Of these stocks, a good amount of shorts were rolled over to the April series in IndusInd Bank, Axis Bank, Federal Bank and RBL Bank.

On the stocks front, there’s not been a noticeable long rollover in any stock. The stocks which added huge shorts and which got rolled over to the next series are Vedanta, Indigo, IndusInd Bank, Petronet, Titan, TCS, Axis Bank, Federal Bank, and RBL Bank, among others, said MOFSL.

Published on March 30, 2020

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