Bloomberg News

Traders Roll Over More Bearish Nifty Positions on Europe Concern

September 28, 2011

Sept. 28 (Bloomberg) -- Equity derivatives traders in India rolled over more bearish bets on S&P CNX Nifty Index futures amid concern interest-rate increases will worsen the impact of global financial turmoil on local company earnings.

The so-called roll cost for the Nifty, or the difference between current and next month futures price, fell to 6 rupees per contract from 12 rupees yesterday, suggesting some traders expect the gauge to decline, said Neeraj Agarwal, derivatives analyst at Emkay Global Financial Services Ltd. in Mumbai.

The Nifty has fallen 12 percent this quarter ending Sept. 30, the worst performance since the three months ended December 2008, amid concern the Reserve Bank of India’s record increases in borrowing costs, Europe’s debt crisis and a faltering U.S. recovery will combine to depress company profits. India VIX, which gauges the cost of buying protection against losses in Nifty options, reached a two-year high on Sept. 26.

“More short positions are being rolled over to the next series on fears Europe and the U.S. may throw up negative surprises in the coming days,” said Agarwal.

Earnings for 47 percent of the companies on the benchmark BSE India Sensitive Index lagged behind analyst estimates in the quarter ended June, compared with 33 percent that missed forecasts in the previous quarter, according to Bloomberg data.

Infosys Ltd., India’s second-biggest software-services provider, will announce results on Oct. 12, the first company in the Nifty to post earnings for the quarter ending Sept. 30.

Traders rolled 43 percent of September contracts as of 1:37 p.m. Mumbai time, in line with the average a day before expiry in the past three months, data on the Bloomberg show. Open interest in Nifty futures, or the number of contracts held by traders, climbed 23 percent to 733,709.

The Nifty dropped 0.4 percent to 4,944.50 and its October futures traded at 4,941.

Indian derivative contracts expire on the last Thursday of every month.

--Editors: Ravil Shirodkar, Matthew Oakley

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net


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