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Unnerving volatility seen on expiry day

Indian markets witnessing high end volatility in past couple of days with aggressive unwinding seen on index heavy weight stocks, Nifty settled the March expiry at 14,325 levels losing ~5% while Bank Nifty lost ~9% during the same period. Highlights for the March series are a) India VIX bottoming near 20 mark with high end intraday gyration seen for Index b) Participants reacting to many moving parts, with 10Yr US bond yields rallying from 1.3x to 1.75x, sharp gains for dollar index moving back to 92.5 mark, worrisome Covid situation keeping traders on edge c) Aggressive short buildup seen on Bank Nifty with aggregate base OI gains of ~2x compared to previous month.    

Rollovers for Nifty/Bank‐Nifty stood at 82% (98lacs shrs)/88% (29lakh shrs) vs 77% (1.04cr shrs)/77% (14lakh shrs) previous month, Aggressive short rolls for BankNifty as with 29lacs shrs rolled highest in previous 12 months’ vs 9 months avg. of ~15lacs shrs. Market wide rolls stood at 85% lowest seen in recent times with 9months avg. of 91% as large unwinding seen on heavy weight stocks.  

FII’s derivative stats, index futures long rolls declined in absolute terms it stood at 82% vs 3month avg. of 85% while index futures short rolls at 68% vs 62% on 3month avg. February series starts with index futures long to short ratio of 1.66x vs 3month avg. of ~3x at start of series. On options front, Max. call/put OI on Nifty for April monthly series stands at 15k calls (OI 2.1mn) and 14k put (OI ~3.1mn) shares. We expect exorbitant markets volatility to continue as thick and fast news flows will keep participants on edge, significant hurdle zone seen now on upside at 14800‐14850 mark.

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