Mkt rally brief; Nifty to hit 5750 post Sept expiry: Expert

Many market participants have rolled over their positions to the October series, however aggressive shorts have been built up in sectors like capital goods and banking where pharmaceutical stocks, fast moving consumer goods (FMCG) and IT are seeing long side bias, says Yogesh Radke, Head-Quantative Research, Edelweiss Securities.

Speaking to CNBC-TV18 about the F&O segment, he clarified that expansion of rollover cost is because of currency hedging cost shooting up and not because of ultra bullish market sentiment. The currency hedging cost has gone up from around 80 bps to nearly 100-110 bps, he added. Market’s upmove may fizzle out post this expiry because the rollover cost increasing. So, the Nifty showing some weakness and drift down towards 5,750 levels, he cautioned. Also Read: Mkt not ready for earnings letdown; churn portfolio, says Pramerica MF Below is the edited transcript of Yogesh Radke’s interview with CNBC-TV18 Q: Looks like this contract we will swim through at current levels, is that how the close, end of the day play looks like? A: The rollovers have been quite good till yesterday’s trading sessions. Today also we are seeing through the day quite an amount of rollovers have increased in the market, so the participants are rolling their position to the next series. Now the roll costs have also expanded to around 110 bps odd, which normally is around 80 bps. This is also related to the currency hedging cost which has shot up of significantly in to the market. The currency hedging cost is around 100-110 bps and that’s the reason the roll cost also has expanded into the normal market. People are rolling their positions, but there are couple of sectors, stocks where the short side aggression is still there and there are stocks where there are some long side bias. So, if we largely look at the picture then there are sectors like capital goods, banking sector where short side aggression has been witnessed. Long side bias has been looked at into the pharmaceutical stocks, fast moving consumer goods (FMCG) and even IT stocks. Q: You spoke about aggressive rollover both volume wise and the cost. Does this mean that we are starting the October series with a bit of a danger with too much to carry? A: The expansion of roll cost is not because of any ultra bullish sentiment in the market. It is all because of currency hedging cost shooting up; you have to roll it at a higher cost here. So, that is the relation which is running at present. The market may not continue the bull run post expiry given that the roll cost is based on the currency hedging cost increasing. Post expiry we may see the Nifty showing some weakness and drifting down towards the 5,750 levels. Q: What is the range you are seeing for the October series itself and are people hedging a lot on the downside; we have seen the 5,600 Puts-5,700 Puts see some action? A: With the rally of more than 700-800 points in last expiry, people are quite cautious on the Nifty movement. So, the downside protection has been bought for the Nifty for the next month given that this is a long expiry. Also, there are already concerns build-up into the system and we have seen some amount of shorting of Futures in single stocks by foreign institutional investors (FIIs), which could be hedge position against their long portfolio. But still there isn’t sign of cautiousness in the market where at these levels people would like to buy protection or hedge their portfolios by shorting Futures.