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Open interest stays high,but no need to panic yet
It’s still the first week of the new contract and the market-wide open interest is already flirting with the Rs 70,000-crore mark.
Updated : Sep 15, 2017, 01:00 AM IST
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MUMBAI: Open interest is high and rising, but it’s not heavy enough to sink the market, yet. It’s still the first week of the new contract and the market-wide open interest is already flirting with the Rs 70,000-crore mark. But market watchers say it’s not time to worry.
With the cash market at an all time high, this is natural and one shouldn’t read too much into it at this stage, say analysts.
“Nothing great about it. Open interest in value terms is a combination of price movement and the number of open positions. With the cash markets on an all time high underlying prices remain high, this has led to high open interest.
Increase in open interest is also because of the rise in cash-futures arbitrage opportunities,” Karun Mutha, Head of derivatives, IL&FS Investmart.
Heavy open interest build-up in the futures market has pulled down the cash market several times in the past.Marketwide open interest, which had touched an unprecedented Rs 80,000 crore towards the end of June series, still remains high, creating fears of a sell-off in case of a sharp fall in the cash market.
Some analysts also attribute the rising open interest to the new stocks included in the F&O segment. NSE added 31 new stocks to the F&O segment on May 14, taking the total number of stocks to 192.
Between then and July 4, the open interest increased 31%. On May 14, the old lot of 161 stocks accounted for Rs 40,680 crore open interest.
While this has risen to Rs 50,722 crore, the contribution of the new stocks to the open interest rise has been significant.
The futures open interest of the newly included stocks was Rs 3,297 crore on July 4, up from Rs 367 crore, two months ago. Options open interest rose by only 9% during the period.
Though these figures are consolation for the bulls, if the open interest continues to rise, it could spell trouble. “Open interest is high. In the last week of expiry, we saw open interest of around Rs 82,000 crore.
We are not very far from those levels. If we get there before July 15, then there could be some trouble,” said Siddarth Bhamre, fund manager, derivatives at Angel Broking.
