[ad_1]
Mumbai: Investors and traders rolled over the highest number of outstanding bets on Bank Nifty futures in 10 months, indicating that heavy bearish bets have been rolled over to the February series ahead of the interim budget, as the Bank Nifty has fallen 7.5% to 44866.15 from the December to January expiry.
Analysts said the rise in rollovers of bearish bets could ironically result in a bounce as any small trigger could induce heavy short-covering – bears reversing the sell to buy positions to close out the contracts.
Every futures contract expires on the last Thursday of a month. If Thursday happens to be a holiday, the rolls happen on the previous day. Rollovers signal market sentiment. High rolls accompanied by falling prices means shorts have carried forward their bearish position.
High rolls alongside rising prices indicate bullish positions being carried forward.
At the expiry of the January series, Bank Nifty rollovers stood at a provisional 3.43 million shares, the highest since 3.57 million shares were rolled over to the April 2023 series. Back then, after the record high rollovers, the Bank Nifty index rose by 7.7%, said Manoj Vayalar, VP (derivatives), Religare Broking.
“Provisional data shows the rolls close to April levels, which are short rolls, going by the price action. But, any trigger could result in massive short-covering, which could result in Bank Nifty bouncing back after it saw a spate of selling in the second half of this month,” Vayalar said.
Banks have been in focus since HDFC Bank released its Q3 results on 16 January.
The shrinkage of net interest margins and slower than expected deposit growth has caused the stock to plunge 14.5% to ₹1,434.90.
Tepid results by Kotak Bank, IndusInd and Axis Bank have added to the bearishness as the results came in-line, or below Street expectations.
Heavy selling in banking stocks dragged down the weightage of financial services sector on the Nifty 50 to 33.43% on 18 January from 35.26% on 29 December. HDFC Bank was hit the most, with its weight falling to 11.9% from 13.52% in the comparative period. Kotak Bank’s weight slipped to 2.79% from 2.95%.
This has caused huge shorts to be rolled over to the February series of derivatives. But the Bank Nifty recovering from below its 200-day simple moving average of 44709.85 to 44866.15 at closing on Thursday and the fact that HDFC Bank and its peers like Kotak Bank and Axis Bank have also corrected is indicating that prices could be turning attractive for buyers.
“We have seen shorts being rolled over in banking and tech,” said Shrey Shah, global asset allocator, Ashika Global Family Office Services.
“However, out of all these sectors, I believe that the banking sector will experience short-covering very soon, indicating upside movement.”
Tracking the market sentiment, Shah explained that the one-sided rally in benchmark indices in November and December last year, tracked a global market rally, on hopes of four rate cuts by the US Fed in 2024. However, the forecasts of rate cuts have moderated, on fears that inflation in the US could remain higher for a longer .
“Therefore, we are seeing a decline in the Asian stock market along with the Indian market. Also, due to the upcoming budget, the market looks choppy and we may see the Nifty trading between 20800 and 21800. Nifty closed at 21352.60 on Thursday.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 25 Jan 2024, 09:58 PM IST
[ad_2]
Source link