India’s Nifty Futures Roll Over Below Average as Foreigners Sell

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Indian traders extended fewer April CNX Nifty Index futures than the average rate over the past six months, signaling caution before the securities expire on Thursday after three days of selling by foreign investors.

The roll over in April index futures was at 37 percent, according to data available as of 4:07 p.m. in Mumbai, as investors replaced current-month derivatives with May contracts. The rate compares with a six-month average of 43 percent two days before expiry, data compiled by Bloomberg show. Global investors sold a net $66 million of index futures on Monday, capping a third day of outflows.

The lower rollover rate comes after a stretch of losses for stocks, with the 50-member Nifty poised for a second straight monthly drop in April. Concern that corporate earnings growth will slow pulled the index’s valuation to 15.5 times projected 12-month profits on Tuesday, the cheapest since May 2014.

“We are not out of the woods yet and there is fear the Nifty can crack until 7,700,” Akash Dharia, head of derivatives at ICICI Securities Ltd., said in a phone interview today. “Some long rollers are waiting on the sidelines. They would rather unwind their positions than roll to the next series.”

The 50-stock Nifty increased 0.9 percent to 8,285.6 at the close on Tuesday. Nifty futures for the current month climbed 0.7 percent to 8,278.45, while the second-month contract for delivery in May added 0.7 percent to 8,337.75.

At current prices, May futures are trading with the smallest premium over the spot Nifty index in two months for a second-month contract, reflecting muted investor expectations for stock gains. This premium has narrowed over the past month. On March 27, the day April futures became the first-month contract, second-month futures had the biggest premium over the Nifty index in three years.

The India VIX Index, a measure of protection against stock market swings using options, slumped 7.1 percent to 17.41, its biggest drop since Feb. 28. The drop comes after the gauge halted a nine-day rally on Monday.

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