Poor rollovers for Feb series

If the current marketwide rollover of 18.5% is an indicator, rollovers for the February series are heading for an all-time low.

Only four days remain for the expiry of the January month contracts, and futures worth only Rs 12,143 crore have been rolled over so far out of the total outstanding open interest of Rs 65,521 crore.

The rollovers in Nifty futures is at an all-time low of Rs 5,600 crore or 27.8% of the total open interest of Rs 20,158 crore. The rollovers in stocks futures are at a low of Rs 6,453 crore or 14.4% out of the total outstanding open position of Rs 44,831 crore.

The marketwide rollovers in the January futures contracts had been robust at 33% of the total outstanding open interest of Rs 98,273 crore before four trading days of the expiry of the December futures contracts. The rollovers in Nifty futures contracts was 40.95% or Rs 9,748 crore while stock futures had rollovers of Rs 22,585 crore or 30.5%.

The poor rollovers have been caused by the recent whiplash on Dalal Street that wiped out Rs 18.5 trillion market capitalisation of actively traded stocks. The market cap of 224 stocks traded on the futures and options segment declined steeply by Rs 12.50 trillion - forcing F&O players to heed margins calls or unwind their long calls. F&O players who lost heavily during the bloodbath could not make mark-to-market payments to carry-forward their longs.

The unwinding of long positions resulted in a sharp decline in open interest by over 42% from a high of Rs 110,000 crore on January 8 to Rs 63,000 crore on Thursday.

Retail investors who took leveraged positions in the derivatives segment saw their shares sold by brokers to meet margin calls. In the process, the F&O positions got pruned substantially. With most small brokers saying no to new positions, rollovers are just not happening.

Stocks hit by poor rollovers were mainly from the mid-cap segment, which have been hit in the current meltdown. Of the 224 stocks traded in the F&O segment, the rollover for 108 stocks has been less than 5%. It was between 5-10% for 75 stocks, between 10-20% for 36 stocks and over 20% for five stocks.