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Traders roll over fewer bets as Indo-Pak tension escalates

The fear gauge is unlikely to see the kind of sharp rise that was seen on Thursday but will remain elevated given the key events lined up in the next few weeks.

, ET Bureau|
Updated: Sep 30, 2016, 08.08 AM IST
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The fear gauge is unlikely to see the kind of sharp rise that was seen on Thursday but will remain elevated given the key events lined up in the next few weeks.
The fear gauge is unlikely to see the kind of sharp rise that was seen on Thursday but will remain elevated given the key events lined up in the next few weeks.
Mumbai: Traders carried forward fewer stock and index futures contracts to the October series on expiry of the September contracts on Thursday owing to growing India-Pakistan tensions and rich share valuations. While bullish bets were squared off amid the selloff on Thursday , a sizeable portion of the rolled over contracts were short positions as the Volatility Index (VIX) soared 33% -its biggest surge in a day since August 24, 2015.

Rollover of all stock and futures positions stood at 75%, lower than the average 79% in the last three derivatives expiries. Nifty futures rollover stood at 66%, lower than the average rollovers of 75% in the last three series. “Rollovers were low because market has run up sharply without any major corrections, IndiaPakistan geopolitical tensions and the upcoming RBI policy. That is why people chose to wait and again buildup of positions will happen once there is stability in the market,“ said Chandan Taparia, derivative analyst, Anand Rathi Securities.

The October series will start with market-wide futures open interest of Rs 95,700 crore compared to Rs 1,00,000 crore at the start of the September series. The Nifty futures roll cost stood at 52 basis points, down from 58 basis points on Wednesday .

Analysts expect the VIX to rise further in the coming days as the market is on the edge. Chandan Taparia, derivative analyst at Anand Rathi said the VIX may rise to 21 level in the next few sessions.

“The fear gauge is unlikely to see the kind of sharp rise that was seen on Thursday but will remain elevated given the key events lined up in the next few weeks," said Sahaj Agrawal, associate vice-president, derivatives, Kotak Securities. “The sharp rise in VIX indicates that the market sentiment is shaky and uncertain for now.“

Among the sectors, long rollovers were seen in metal, information technology and cement companies, while short rollovers were seen in banks and automobile firms.

Derivatives analysts expect the selloff to deepen if the Nifty falls below the crucial support of 8500. On Thursday, the index ended down 1.8% at 8591.25.

Agrawal of Kotak Securities said the trend would remain positive till 8500 is held and the index could see a strong bounce back to 9000 levels.
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