Volatility index slumping to 11.12 suggests a positive start to 2020

KS Badri Narayanan Chennai | Updated on December 27, 2019 Published on December 27, 2019

Rollover, premium of Nifty 50 Futures also indicate bullish signal

The rollover data of Nifty 50 Futures signal the market may maintain the positive momentum in the New Year. Though the Nifty 50 Futures saw a rollover of about 69 per cent, against the three-month average of 72 per cent, most short positions were allowed to expire.

The India VIX fell by 20.5 per cent in this series and is now at 11.12, which is the lowest in several months. Lower volatility suggests that declines could be used by investors as a buying opportunity.

India VIX, the widely used fear gauge number, indicates that market participants are not nervous now, compared with their attitude a few months back. The index had hit a high of almost 30 during May, ahead of the general elections. The index was hovering between 14 and 17 in the last six months, giving some anxious moments to investors.

The rollover figure also hints that longs’ open interest positions have been rolled over to the January Series, as the Nifty 50 January commands a premium of good 69 points and the February Series an even better premium of 105 points. This indicates that traders are willing to roll over the long positions expecting the market to perform better in anticipation of a market-friendly Budget.

The Bank Nifty saw a rollover of about 78 per cent, which is slightly better than the three-month average.

Single stock futures remained robust in terms of rollovers with over 90 per cent of positions moved to the next month series.

“FIIs’ net position in index futures has turned positive during the month, where they were having net short positions for the last 5-6 months. In single stock futures, FIIs continued to be net long with current net position at the highest level,” said Rahul Mishra, Assistant Vice-President — Derivatives, Emkay Global Financial Services.

An options concentration suggests that Nifty will remain in a range of 12,000-12500 for January, though 12,200-call holds decent open interest, making it the near-term resistance, he added.

Stock-wise, better rollovers are seen in Bajaj Finance, SRF, HDFC, JSW Steel, etc while lacklustre moves are seen in the capital goods and cement counters, Motilal Oswal analysts said in a note.

Published on December 27, 2019
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