Unwinding of position in the derivative segment continued for the second consecutive day on Thursday. However, there was also a build-up of a considerable amount of the short position in the futures segment. As a result, Nifty October futures ended the day at 5,309.90 points, with the discount widening to 41.1 points as compared to spot Nifty’s close of 5,351 points. On Wednesday Nifty October futures had shed 16.23 lakh shares in open interest.
A derivative analyst with a domestic brokerage firm said, “There was unwinding of position in the derivative segment. The implied volatility in Nifty 5,200 option in the intra-day had shot up to 56-57%, indicating that the market will continue to witness a high amount of volatility in the coming days.”
Yogesh Radke, derivative analyst, Edelweiss Securities, said, “Towards the end of the day they were aggressively selling in Nifty futures resulting in the widening of discount in the Nifty futures. As the forthcoming October derivative expiry and Sebi’s finalisation of the draft guidelines on PN, fall on the same date, the market is expected to be highly volatile in the coming trading sessions. Hence investors are advised to invest cautiously and get their position hedged.”
A dealer said that clients with a highly leveraged position in the derivative segment were forced to square of their position.
If the market continues to fall, margin calls will come and the situation may worsen further.
Market experts say that those stocks, which had witnessed a run up in its prices in the Sensex journey from 15K To 19K, have taken a severe beating, and these counters are looking very weak at the moment.
Also, speculation of another CRR hike by the Reserve Bank of India (RBI) in its forthcoming Credit Policy review meeting to rein in excess liquidity, has resulted in a build-up of the short position in interest sensitive sectors like realty, banking, and auto, said analysts.