Mumbai: Sentiment continued to be weak ahead of the US Federal Reserve meet, as bears took control of rollovers in the F&O segment.

While the rolls were quite good — Nifty rolls were at 65% on a heavy open interest of about 4.1 crore shares — the bad news is, experts say, that nearly 70% of these are shorts being carried forward, underscoring a bearish view.

“Definitely, the rolls are more on the short side. I feel the long guys are waiting for a clear signal from the Fed meet. Market was expecting a repo cut from the RBI, but when that didn’t happen, people decided to wait for the outcome of Wednesday’s events, before taking a call,” said Anand Kuchelan, senior derivatives analyst, PINC Research.

Experts said a further cut in policy rates either 25 or 50 bps will be a key trigger for the market.

The Federal Reserve is expected to make the announcement on Wednesay (midnight India time).
“That would give a positive impetus and only then will the longs roll their positions over, and fresh longs will be initiated in the February series,” Kuchelan said.

Yogesh Radke, derivatives analyst, Edelweiss Securities, said marketwide rollovers have picked up significantly on Wednesday.

“From 39% on Tuesday, this has gone up to 57%. The roll cost on single-stock futures has come down to 65-70 bps from around 90 bps in the previous expiries. This shows that the long rollers are not as aggressive as they were before. Another indication of the aggression of short rollers is the jump in the roll cost of Nifty contracts.

From 12 bps in the last expiry, this has jumped to 27bps,” Radke points out. He feels the February series is likely to be very volatile.

“Shorts were witnessed in all heavyweights. However, if Fed cuts rates by 50bps, then all these shorts will come for squaring off,” said a derivates dealer at a local brokerage who did not want to be named. He said the index would be range-bound in the levels of 5100-5400 over the next one week.

Banking stocks, which had seen some action ahead of the credit policy, also fizzled out after the RBI announced status quo on key rates.

Short-selling by institutions which is to be introduced in February, could bring down volatility, feel some. But even here, there are concerns that things will not get running from day one.

“It is good initiative. But these new systems, need gestation time before they get liquid and effective,” says Radke.

Money coming out in the form of refunds from Reliance Power IPO also will act as a key driver for the markets, felt experts. Sources said the allocation process would end on Thursday and the refunds will begin from Friday.

 

Source : Dna