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Indian Traders Pare Futures Bets as Nifty Retreats From Record

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The number of outstanding CNX Nifty index futures contracts fell from a five-week high amid speculation a recent rally in the stock market was overdone.

Nifty futures open interest slid to 1.17 million contracts as of 4:46 p.m. in Mumbai from 1.20 million contracts at 1:35 p.m. on Wednesday. The total number of wagers stood at 1.18 million at the close on Tuesday, the highest since Jan. 29, when the outstanding contracts had reached an all-time high. The Nifty index declined 0.8 percent to 8,922.65, erasing gains after climbing as much as 1.4 percent to an intraday record.

The profit taking in local stocks wasn’t surprising as “we were a bit stressed,” Hemen Kapadia, a senior vice president at KR Choksey Shares & Securities Pvt., said in an interview with Bloomberg TV India. Nifty futures open interest was “so huge” that even a small reduction in the total number of wagers could lead to a slump, he said.

The decline on Wednesday pares the Nifty’s gains this year to 7.7 percent, still keeping it on course for a sixth straight quarterly increase, after foreigners bought $4.6 billion of local stocks. The gauge trades at 16.6 times its projected 12-month earnings, the highest level in more than four years.

The Nifty rallied to an intraday record after Reserve Bank of India Governor Raghuram Rajan lowered the benchmark repurchase rate to 7.5 percent from 7.75 percent in an unscheduled move. The decision came four days after Prime Minister Narendra Modi boosted infrastructure investments and proposed a formal inflation target in the federal budget.

The India VIX index, a benchmark gauge of option prices, slid 1.9 percent to 15.20, capping an eighth day of declines, its longest streak of losses since March 2010.