India Budget Optimism Raises Cost of Extending Nifty Futures

  • Roll cost poised for six-month high as February futures expire
  • Finance minister Jaitley to present federal budget on Monday

The cost of extending Nifty 50 Index futures contracts climbed to the highest level in six months in a sign of optimism before next week’s federal budget.

The roll cost, or the price traders are paying to replace current month futures with March securities, rose to 62 basis points of the contract’s value at 4.10 p.m. in Mumbai, the highest since August, data compiled by Bloomberg show. Investors carried over 66 percent of their February contracts to the next month, compared with a three-month average of 71 percent on expiry, the data show.

“Traders are preferring to hold their long positions until the budget and are paying a higher carry cost,” Anita Gandhi, a director at Arihant Capital Ltd. in Mumbai, said in a phone interview. “The long bets are in anticipation that markets may not fall further and the budget may hold some positives.”

Finance Minister Arun Jaitley is expected to boost investments in infrastructure and provide relief to rural areas to spur growth when he presents the budget for the year starting April 1 on Monday. Economists surveyed by Bloomberg estimate he’ll meet the government’s fiscal deficit target for the year ending March 31, while slightly pushing back next year’s goal to 3.6 percent of gross domestic product to make room for the additional spending.

The India VIX Index, a gauge of protection against stock market swings using options, fell 0.9 percent to 22.75. The 50-member Nifty slid 0.7 percent after rising 0.2 percent earlier.

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