Punters rolled over a higher proportion of derivative bets to May and purchased select bank stocks to rake in dividends, sharply pushing up the market in the last half hour of trade. Most expect an interest rate cut at the RBI's monetary policy meet on May 3. Benchmark indices Nifty and Sensex rose to their monthly closing highs.

The Nifty ended up 1.36% to close at 5916.3, its highest since March 11; the Sensex rose 1.19% to 19406.85, the most since March 15. The underlying bullish sentiment was reflected in the increased positions moved to the next month. Marketwide rollovers stock and index futures stood at around 73%, a tad higher than the 70% seen in the past few expiries. Nifty futures rolls stood at around 67% against 57% of the previous few expiries.

Marketwide open interest (OI) the value of outstanding bets at the beginning of the May series is Rs 35,300 crore, up from Rs 30,400 crore at the start of the April expiry, according to Edelweiss. Nifty futures will start the May series with an OI of Rs 9,400 crore.

Banking and IT were among sectors that witnessed higher rollovers. HDFC Bank saw 61% rolls against 51% at the end of the previous series; LIC Housing FinanceBSE 0.58 % saw 92% rolls (90%), Infy 68% (58%) and TCS 76% (70%).

Nonetheless, there was a degree of caution among traders, many of whom have burnt their fingers in choppy trades during the last few months. Despite having carried forward their positions, they were reluctant to pay a high cost for the rollovers.

"The cost to roll over long bets at 65-68 basis points was not high," said Yogesh Radke, head of quantitative research, Edelweiss. "This shows that sentiment, though positive, was cautious as high rolls typically stand in the 80-85 bps range," he said.

Apart from the positive rolls, the sharp rally in the last half hour of trade was partly attributable to punters having squared off futures positions in select banking counters such as ICICI BankBSE -1.52 %, Axis BankBSE -2.19 % and HDFC Bank to buy shares of the companies in the cash segment on dividend expectations.

This is borne out by the rise in traded volumes. In ICICI Bank, the number of shares traded stood at 62 lakh against the two-week average of 41 lakh; in HDFC Bank the volume was 64 lakh (41 lakh) and in Axis Bank, it was 38 lakh (19 lakh). This, coupled with short covering in counters such as Hero, M&M and Bajaj AutoBSE 1.54 %, drove the Nifty and Sensex to monthly closing highs, said Aadil Sethna, head of derivatives, Dolat Capital. The recent market rally picked up steam from April 16, following softening of prices in gold and crude oil, two of India's major imports.

Gold fell sharply on talks that Cyprus will sell its gold reserves to secure a bailout package from EU to recapitalise its banks, while a slowdown in China pulled down Brent crude below $100 a barrel last week. Higher crude and gold prices expanded India's current account deficit to 5.4% of GDP in the fiscal year through December 2012, way above the 4.2% in FY12.

In the wake of the fall in gold and crude prices, the Sensex has risen 662 points since April 16 as this will translate into lower inflation and ease current account deficit, prompting RBI to cut interest rates. However, brokers like Nirmal Jain believe markets will consolidate in the short term given the magnitude of the recent rally. "The fall in crude and oil has driven the current market rally," said Nirmal Jain, chairman, India Infoline.

"But we will consolidate in the short term until the RBI policy meet on May 3." Markets have factored in a 25 bps cut in the repo rate, and if that happens, some profit booking could be expected. However, if RBI cuts rates by 50 bps, the current momentum will continue, Jain said. Meanwhile, FIIs purchased shares worth Rs 1,449.7 crore on Thursday, provisional data from BSE showed.

Keywords:Punters, bank stocks, market,RBI's monetary policy ,Nifty,Edelweiss,HDFC Bank , LIC Housing Finance,BSE ,ICICI, Axis Bank,HDFC Bank,crude prices, RBI ,
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