Indian traders turn cautious as Nifty rollover cost hits five-month low

Indian traders are cutting back on fresh bets as the cost to carry forward futures contracts drops to a five-month low. The Nifty rollover cost fell to 0.29% for the October series, down from 0.78% at the end of September. A report by Aditya Birla Money notes that this drop points to lower optimism and a cautious approach as traders enter the November series.

Market Pressures

High oil prices and worries over possible US-Iran tensions after the 3 November US midterm elections are driving this caution. Shai Coelho of Vtrender points out that rollover costs are at their lowest since May, when traders worried about a fragile West Asia ceasefire. US President Donald Trump has ruled out attacks on Iran before the elections but left the door open for military action afterwards. Meanwhile, Nirmal Jain of the IIFL group warns that high oil prices worry investors about the current account deficit and the currency, though he does not expect much downside since local markets are oversold.

Context

Rollover costs show how willing traders are to move their bets from one month to the next. When these costs drop, it usually means market participants feel less sure about near-term gains.