budget: Traders cut bearish bets for Jan F&O series, all eyes on Budget

Mumbai: The upcoming Union Budget on February 1 is likely to dictate market direction in the January series. D-Street is concerned about whether the government will breach the fiscal deficit target in the Budget and will also watch out for measures to boost sagging economic growth.

The December series saw the Nifty ending down 0.2 per cent on an expiry-to-expiry basis and the Sensex gained 0.1 per cent during the same period. The Sensex had hit an alltime high of 41,809.96 on December 20 and Nifty hit a record high of 12293.90 on the same day.

Derivative analysts said that traders have cut short positions, explaining 61 per cent lower Nifty rollovers than the three-month average. At 1.13 crore shares, open interest in the Nifty is the lowest in five years, said Amir Gupta, head of derivatives at ICICIdirect.

Analysts said traders have cut short positions given that global market sentiment became upbeat after UK elections saw pro-Brexit Conservative Party winning the polls and US-China trade tensions eased. Rollover cost increased to 60 basis points, and was higher than the three-month average of around 40 basis points which indicates that positions that got rolled over were on the long side, said analysts.

India VIX fell 20.5 per cent during the December series to 11.12 from13.99 on previous expiry day.

Chandan Taparia, derivative analyst at Motilal Oswal, said global market liquidity is supporting the market and has led to buying in heavyweight stocks.

“The Nifty is likely to trade in the range of 11,900 to 12,300 in the immediate term,” said Taparia. Most of the positions rolled over are on the long side, said Taparia.

Metal stocks saw more of long positions being rolled over on expectation of improved demand on account of reduced trade tensions. Private banks also saw more of long positions being rolled over. Capital goods and cement stocks saw more of short positions being rolled over.

Amit Gupta of ICICIdirect does not expect the 12,000 level to be breached soon. “The market is in a base formation phase and we don’t expect 12,000 to be breached. Further direction will depend on the Budget,” said Gupta. The 12,000 level holds the highest open interest among Nifty put options. Among call options, the 12,200 strike holds the highest open interest followed by the 12,500 strike.