India Stock Futures Roll Cost at 7-Month Low Before Expiry, Fed

Indian traders are paying the least in seven months to carry forward NSE Nifty 50 Index futures contracts as demand cools for leveraged bets amid weakness in global stocks.

The roll cost, or the difference between current and next month futures prices, slid to 23 basis points from a three-month average of 44 basis points at 1:31 p.m. in Mumbai, data compiled by Bloomberg show. Traders rolled over 46 percent of the contracts to the February series that starts Friday, versus a six-month mean of 56 percent, the data show.

“Foreign funds are not only selling in the cash market, they are also lightening up on derivatives,” Chandan Taparia, a derivatives analyst at Anand Rathi Financial Services Ltd. in Mumbai, said by phone. “Long-position holders are not aggressively carrying over their trades as the outlook is still bearish.”

Overseas funds have withdrawn $1.7 billion from Indian shares since Jan. 1 amid concerns about global growth. The outflows, the most since August, brought the Nifty index within 1 percentage point of a bear market on Jan. 21. Futures contracts with an average nominal value of $11 billion change hands daily on the National Stock Exchange of India, nearly three times the amount of cash trading. 

A low level of rollovers reflects lack of confidence among investors about the future direction of the underlying stock or index.

The Nifty lost 0.2 percent to 7,425.25 after changing direction at least a dozen times as investors awaited the Federal Reserve’s statement for the impact of this month’s market turmoil on plans to hike interest rates this year. Even before January’s selloff, fed fund futures were pricing in two rate increases by year-end. That’s shrunk to one, data compiled by Bloomberg show.

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