First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%
An employee walks past an electronic board that indicates the latest stock figures at the National Stock Exchange (NSE) in Mumbai (Photographer: Dhiraj Singh/Bloomberg)  

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

The NSE Nifty Index’s first derivatives series of 2020 ended on a negative note with benchmark indices registering declines amid Coronavirus outbreak in China. Investors fear a rapid spread of the virus to other countries could have ramifications on economic growth.

Indian markets turned jittery in the run-up to the Union Budget on Feb. 1. Traders covered long positions by creating fresh shorts in the derivatives market while in cash both domestic and foreign institutional investors were net sellers during the series.

The Nifty, after touching an all-time high level of 12,430, fell 0.7 percent for the series and the Nifty Bank underperformed for the second straight series by plunging 4.5 percent. Broader markets, which came under pressure in the last two sessions, outperformed with the Nifty Midcap 100 Index gaining 8 percent.

India Volatility Index—the popular fear gauge that tracks investors’ perception of volatility for the month ahead—went up by 50 percent during the series, ahead of the Union Budget. Rollers for both Nifty and Nifty Bank were below the three-month average.

In terms of individual stocks, top performers of the series include the likes of Escorts Ltd., Century Textile and Industries Ltd., Apollo Hospitals Enterprise Ltd. and Tata Global Beverages Ltd. Heavyweight private banks were laggards as most of them exhibited weakness after their quarterly earnings owing to higher slippages. HDFC Bank Ltd., Kotak Mahindra Bank Ltd., Axis Bank Ltd., ICICI Bank Ltd., and IndusInd Bank Ltd. eroded investor wealth during the series.

Cement stocks made a comeback on the back of price hikes by Shree Cement Ltd., UltraTech Cement Ltd., ACC Ltd., and Ambuja Cements Ltd.

City gas distribution companies—Indraprastha Gas Ltd. and Mahanagar Gas Ltd.—continued their 2019 rally after Credit Suisse initiated coverage in the sector. India’s gas demand will double in the next 10 years, the brokerage said.

Nifty Levels To Watch

Immediate support for the Nifty is at 12,000 and any violation below 12,000-mark can lead to further weakness in the index towards the critical support of 11,800, Amit Shah, investment analyst at BoB Capital Markets, said, adding that sentiment can turn negative if the index violates the 11,800-mark.

For the index to show any comfort and continue its time consolidation, it needs to sustain above the 12,250 and 12,300 levels with volume and open interest participation, Shah said. Considering the overall technical and rollover set-up, the index, according to Shah, is likely to face stiff resistance around 12,250-12,300 zone and a higher probability of violating the 12,000-mark.

Nifty Rollover

The Nifty futures rollover was on the lower side both in absolute and percentage terms. The February series started with open interest of 1.08 crore shares compared with 1.22 crore shares in the previous series due to liquidation of long and fresh short positions. The addition of short positions is seen mainly in the last two weeks directly for February and March contracts. In percentage terms, the rollover stood at 66 percent against 70 percent in the previous month.

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

Nifty Bank Rollover

The Nifty Bank rollovers too were at the lower end with combination of long liquidation and fresh shorts. The rollovers in percentage terms stood at 62 percent compared to 78.5 percent in the previous series. In terms of open interest, the February series starts with open interest of 0.12 crore shares against 0.13 crore shares.

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

Nifty IT Index Rollover

The Nifty IT Index outperformed the Nifty and the Bank Nifty. The index gained 4 percent for the January series. However, the rollovers trend looked the same at 92 percent against 91.8 percent, in line with the previous contract.

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

Marketwide Rollover

The rollovers across stock futures were higher in absolute terms with the series starting at open interest of 406 crore shares compared to 390 crore shares in the previous contract. In percentage terms, however, the rollover was at 88 percent compared to 92 percent in the previous contract. Overall, large caps witnessed a rise in open interest from 257 crore shares to 279 crore shares.

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

Market Breadth Of F&O Stocks

Of the total 144 stocks in the F&O segment, market breadth was positive across stock futures owing to outperformance from broader markets—91 stocks advanced against a decline in 53 stocks.

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

Sectoral Rollovers

Positive Rollover: Cement, Capital Goods, Finance

Negative Rollover: Banks, Metals, Oil & Gas

Neutral Rollover: Auto, Pharma, Technology

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%
First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%
First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

FII Set Up Ahead Of February Series

Index Futures

Foreign institutional investors turned net short after being net long in the previous two series. FIIs at the beginning of the series are net short by 75,442 contracts against being net long with 23,392 in the previous series.

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%

Index Options

On index options, FIIs are starting the series on a mixed note with buying protection via puts to hedge themselves against uncertainty but are also selling more puts indicating downside to be limited.

First Derivatives Series Of 2020 Ends With Losses; Volatility Index Surges 50%
BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.