Rollovers placid, shorts getting rolled over

MUMBAI: Taking a sentimental cue from the bonus issue powered Reliance Power, the benchmark indices rallied, and the BSE Sensex gained 301 points to end the day at 17650.

The share shot up 8% to close 40 paise above its issue price of Rs 450 for the first time since listing two weeks back.

Positive cues from key Asian markets also helped. “Some amount of confidence has come back among retail investors. Hopefully this results in reversal of sentiments,” said Manish Sonthalia, equity strategist, Motilal Oswal Securities.

He called Monday’s move as a technical bounceback. Volumes remain an issue because domestic institutions such as insurance companies, which have received good inflows during this tax saving quarter, are playing a waiting game and not actively deploying money yet.

They seem to be waiting for psychological 15000-15500 levels, which is the recent low for the market. for putting their money in.

And other players, who are not that bearish are already invested. With the foreign investors keeping away completely, the market is drifting aimlessly for want of some incremental buying to emerge.

But Sonthalia says turnover on Monday was been better than what we have seen over the last few weeks. “If we are able to sustain such volumes, then we may head towards less volatile days in the market,” he said.

On Monday, turnover jumped to over Rs 68, 000 crore, aided largely by heavy short-covering and fresh build-ups in the Reliance Power contracts.

However, this is not good enough for first day of expiry week. “Participation from both institutions and retail was not that remarkable. We expect it to improve over the next three days,” says Yogesh Radke, derivatives analyst at Edelweiss Securities.

Rollovers were very lukewarm with cost dropping to 60-65 bps. Last expiry, they were hovering around 80-90 bps.

“A drop in roll costs is indicative of the fact that long rollers are not that aggressive. Nifty roll costs were at a discount of 20-25 points. This, again, is an indication that short positions are aggressively rolled over. Most of these may be hedged positions of investors against their portfolio,” said Radke.

Market wide rollovers were at 34.3%, while the Nifty rolls were marginally better at 35.8%. IT counters saw good amount of roll overs on expectations of some sops from the budget.

Most brokers are advising their clients out of the market as they predict a volatile week.

However, the implied volatility readings have actually receded from around 60% to around 43% for puts and have stayed around here for the past 2-3 weeks.

This is in line with the CBOE VIX, which is currently hovering around the 24-mark. “Around 18-22 on VIX is considered a low-volatility reading. This reading says they are closer towards that range. But the worst in the overseas markets will not be known until April, when the firms there give the details of write downs and whether the fire-fighting measures going on have really worked,” says Sonthalia.

The budget could be a crucial trigger for people to come and buy, feel experts. If there was no big negative surprise, people would be encouraged to buy. But at present, they are staying away.