Sept Futures At A Discount, But Market Remains Bullish

Mumbai, Aug 25: | Updated: Aug 26 2002, 05:30am hrs
Even as the Sensex has gained over 150 points in the past week, some of the frontline pivotals Infosys, Satyam, Ranbaxy among them are showing a discount in the September futures market.

While normally this would be cause for concern for market players who would typically attribute this phenomenon to the fact that the market was taking a bearish view of the immediate future, analysts this time have said these discounts are not worrying signals.

On the National Stock Exchange (NSE), it has been noticed that frontline September stock futures like those of both old and new economy stocks, especially Infosys Technologies, Satyam Computer, Ranbaxy Laboratories and Bharat Heavy Electricals Ltd (Bhel), have been trading at a discount or are at par with their underlying counterparts. But despite this, the market, by and large, remains bullish. This is because leading market players and brokers say once the September quarter results are factored in, the gap between the futures price and the price of the underlying stock will disappear as futures prices begin moving upward.

Reiterating the same sentiment was Refco-Sify managing director Vineet Bhatnagar: Stock futures are historically known to be trading at a premium, the discounts are temporary and would not exist after the corporate actions are announced, he opined.

The operators who have a sell outlook on Nifty futures might find themselves squeezed, and may be compelled to short-sell once a broad-based recovery is witnessed in the cash market segment, which is to happen very soon considering the improvement noticed in the market sentiment, he said.

Dealers from domestic brokerages too are of the opinion that the September futures trading at a discount is no cause of concern as the market operators are not yet factoring in the dividends that are yet to be announced on the stocks and are sceptical about retention of the stock futures.

Analysts are optimistic, that the markets are in a corrective phase, after a rally in the technology stocks, following all-round buying in the technology stocks on the back of a surge on the US bourses in the last few trading sessions. Dealers added that there is also a demand for put options on the NSE which is a clear indication that the Sensex has crossed the psychological barrier of 3100-level.