Indian markets took a well-earned break last week; meandering sideways to close with 4% gain.
‘Better than expected earnings’ was the theme that took stock prices higher in India and elsewhere. This week promised to be exciting one as the long-drawn July series in derivative segment were to roll to a close against the back-drop of continuing corporate earnings announcements and the Reserve Bank of India’s monetary policy review.
Corporate earnings continued to remain robust but the much fancied monetary policy turned out to be a damper. With key rates remaining unchanged, the policy signaled the end of the south bound journey of interest rates. Taking cues, some action was seen in the banking stocks mainly on the futures side as Bank Nifty registered a rise in volumes after quite some time.
High decibel action was already noticeable in the derivative segment beginning late last week with turnover hitting the roof in the last three sessions. Open interest remained close to Rs 100,000 crore and high Nifty put call ratio indicated the possibility of few short-covering induced rallies.
Nifty played out perfectly as scripted, recovering from the lows and ending the July series much closer to the 4,600 mark. Rollover was seen at 68% against 55% seen in the last series. August series starts with an open interest of 23.08 mn shares higher than 21.29 mn shares in the July series. The high premiums on the Nifty August futures suggest long rollovers have taken place. Clearly the mood on the street is still optimistic with participants expecting the bull run to continue into August as well.
In the options space, August Nifty sees maximum open interest at 4,700 strike followed by 5,000 strike. Going by the premiums it is quoting there seem to be more buyers. Hedges have been struck at 4,500 and 4,300 strike puts where the open interest addition has been the highest.
Overall market wide roll over for the July series stood at 78.38% higher than last series with Infrastructure, Power and Telecom registering high long rollovers. Given that the government would soon be announcing the course of divestment program, higher participation for the August series does not come as a surprise.
Whether these directives come in with hopefully more clarity than the budget, would dictate the course of the market going ahead in August.
(The authour is a derivatives analyst)
