Nifty rollovers below average as FII interest muted in Dec series

But Street expects Nifty to rally towards 6,000 in Jan

In absence of active FII participation in the derivatives segment in December, the last Nifty series of the calender year witnessed comparatively muted rollover into January even as market-wide rollovers stood at a healthy 82%.

However, the wide premium of 60 points with which the January Nifty future is trading above the spot market, and the build-up of open interest in the options segment indicate that the Street expects the Nifty to rally towards 6,000 points in January.

At 61.6%, the Nifty rollovers stood at their lowest in seven months and at the widest discount to their three-month average since May 2012. Experts said the FIIs, while generating substantial quantity of long positions in the December series during its first week, did not generate solid new positions in the last three weeks even as they continued their accumulation in the cash market.

?However, they have rolled-over their long positions that were created at the beginning of the series, which is a healthy sign for the market in the January series,? said Siddarth Bhamre, head of equity derivatives, Angel Broking.

Some of the banking stocks like SBI, PNB, Kotak Mahindra Bank and Indian Overseas Bank witnessed rollovers of over 80%. The futures on the Bank Nifty observed 71% rollovers. Some infra and metal names also experienced strong rollovers; December futures on Adani Power, Crompton Greaves, Hindalco, Hindustan Zinc, IRB Infra, IVRCL, JSW Steel and Sesa Goa saw more than 80% rollovers.

Traders are now expecting the Nifty to breach its 23-month high of 59,30.9, which it touched on December 6, and move towards the 6,100-6,150 territory. They believe that fears of fiscal cliff may have been overstated given the lower implied volatility. ?The implied volatility in the market has moved lower during the last three weeks and touched its lowest since early November. This does not depict concerns among traders,? said a trader.

India VIX, gauge of the underlying market volatility, fell 2.5% to 13.62 on Thursday. Generally, the market volatility is observed to fall when the market is on a strong uptrend. Volatility index represents the market’s expected volatility over the next one month and is derived from the prices of the Nifty index options. It is a measure of the amount by which an underlying Index ? the Nifty ?is expected to fluctuate, in the near term.