Derivatives expiry to infuse volatility in equity markets

Indian equity markets are expected to witness volatility on the back of derivatives expiry during the upcoming trading week starting March 27.

“Volatility in the stock markets is expected to be high as traders roll over positions in the futures and options (F&O) segment from the near month March 2017 series to April 2017 series. The near month March 2017 derivatives contract expire on Thursday,” Vijay Singhania, Founder and Director of brokerage firm Trade Smart Online, told IANS.

Apart from derivatives expiry, markets will also seek direction from the movement of the rupee, flow of foreign funds and the fourth quarter results, which will be announced from April 1.

“The important cues that investors will closely follow during the next week would be FIIs (foreign institutional investors) fund inflows in the Indian equity markets as well as the strength of the markets to sustain at higher levels,” Dhruv Desai, Director and Chief Operating Officer of Tradebulls, pointed out.

“Investors will closely follow global market sentiments and quarterly results, while price movement of the Indian rupee against the USD (US dollar) will be the crucial factor for market sentiments next week.”

Last week, the Indian rupee strengthened by five paise to 65.41 against a US dollar.

In terms of investments, provisional figures from the stock exchanges showed that FIIs purchased stocks worth Rs 3,713.82 crore during the trade week ended March 24, while domestic institutional investors (DIIs) divested scrip worth Rs 2,588.97 crore.

Figures from the National Securities Depository (NSDL) disclosed that foreign portfolio investors (FPIs) bought equities worth Rs 5,143.68 crore, or $786.22 million, during March 20-24.

On the technical levels, Deepak Jasani, Head – Retail Research, HDFC Securities, told IANS: “Technically, though the markets have fallen this week (past), the Nifty remains in an intermediate uptrend with no clear signs of reversal yet. Further upsides are likely once the immediate resistance of 9,134 is taken out.”

“Weakness could emerge if the support of 9,019 is broken.”

Rakesh Tarway, Head of Research, Reliance Securities, expects investors to book profits if the NSE Nifty breaks the level of 8,950 during the upcoming week.

“We expect an extensive movement in the week and sustenance above levels of 8,980 to 9,000 will be watched for the up-move. We expect sharp profit booking in high beta sectors and mid-caps in case the Nifty breaks below levels of 8,950,” Tarway asserted.

Market analysts also displayed a long term optimism for the Indian markets on the government’s execution of the Goods and Services Tax (GST) from the beginning of July.

“Finally, the Goods and Services Tax (GST) is going to be implemented from July 1 and the domestic market is expected to continue its upward trajectory when such tax reforms are implemented by the government. It is expected that the Nifty would trade between 9,000-9,250 levels in the coming week,” D.K. Aggarwal, Chairman and Managing Director, SMC Investments and Advisors, predicted.

During the trade week ended March 24, the key Indian equity indices trimmed some gains following global cues and closed on a lower note after two consecutive weeks of gains.

Yet, continuous inflows of foreign funds and a strong rupee prevented the Indian equity markets from slipping further.

The barometer 30-scrip Sensitive Index (Sensex) of the BSE slipped by 227.59 points or 0.77 per cent to close at 29,421.40 points, while the NSE Nifty fell by 52.05 points or 0.57 per cent at 9,108 points.

Nifty Put Call Ratio (PCR) data shows support at 9100 and resistance at 9200

FII positions in Index puts, futures and calls.

(With agency inputs)