Despite the recent run-up and drop in foreign fund selling of late, traders recently carried forward bets on Indian markets to April derivatives series. The Sensex and Nifty jumped extending gains led by shares of lenders after the Union government decided to provide a much-needed 1.7 lakh crore relief package in form of direct benefit transfers and free cooking fuel to safeguard the protection from the impact of the 3 weeks lockdown, which started from 26th March 2020.
Though the government did not extend its support to the stressed industries yet it couldn’t stop the pullback, where Indian markets were able to outperform other Asian and European markets. The rollover in Nifty futures and Bank Nifty futures on a provisional basis were 62 per cent and 55 per cent respectively. However, the rollover in both the contracts of the April month was still way lower their three-month average.
Majority of the left-over positions were on the short side, despite Nifty at around 7,500-8000. The pullback has been complemented by the BFSI segment which has seen the same pattern says Amit Gupta, head of derivatives at ICICI direct.
Rupee and bonds remained stable as the relief package is not likely to impact the government’s finances. Furthermore, India’s benchmark bond yield dipped by eight basis points, pushing the prices up. According to Suyash Choudhary, head of fixed income IDFC Mutual Fund, the fiscal package by the government is smaller than expected. However, it provides some relief to the bond market from a fiscal perspective.
Now RBI needs to respond to this virtual freeze in the bond and money markets, keeping new growth shock in check. The rupee also gained 1.25 per cent to close at 75.15 per dollar. RBI recently sold dollars through the futures markets, helping the local unit’s value. KN Dey, founder of United Financial, a Mumbai-based consultancy firm said, this intervention from the central bank has yielded more than desired results.
The steep decline due to the Coronavirus led to Nifty logging its worst derivates expiry since October 2008. SEBI helped improve overall rollover percentage with short selling restrictions. However, as per some analysts, the market bounce could be short-lived. We may witness low liquidity and higher volatility in the coming days, said Yogesh Radke, head of alternative and quantitative research at Edelweiss.
All eyes are now on the RBI policy. The monetary policy committee meeting of the central bank is scheduled during April 1 and 3. The relief to stressed industries affected businesses due to the outbreak will also be keenly watched. The uncertainty over the rising number of cases still looms large on the market.
