Can traders sustain huge MTF volumes for long?
Will they hold positions by paying margin amount or book profit or loss to square off positions; Many expect Ramotsav boost in the offing for mtks, but several factors will limit the buoyancy for now; It’ll trigger a major rally if BJP retains power for 3rd term: Analysts
image for illustrative purpose
Longer F&O Series
- Margin trade facility surges over 100%
- Feb F&O series Jan 29 -Feb 29
- Only 3 trading sessions this week
- Ram mandir positive impact in mid to long term
Hyderabad: Investors and traders are still keeping options open as many companies are yet to announce results. Traders, who hold margin trade facility (MTF), prefer to hold positions. Generally, brokerage firms offer five times of MTF to traders. Due to the ongoing rally, the margin fund book position at brokerage firms rose over 100 per cent. Key indices already rose over 20 per cent in 2023. BSE Sensex closed at 71,423.65 points on last Saturday (January 20), lower by 848 points or 1.17 per cent from 72,271 points on January 1, 2024. At this juncture, it’ll be a challenging situation for retail investors to hold MTF.
“In a bullish market, many traders and investors aim to capitalize on the momentum by excessively leveraging their positions. During slight corrections within the bullish trend, traders view it as an opportunity for long trades, often overextending their positions to maximize profits. They tend to book profits during market upswings and re-enter during minor corrections,” Dhirender Singh Bisht, associate vice-president (technical research) at SMC Global Securities Ltd, told Bizz Buzz.
“In cash market, it doesn’t have any problem as there’s no expiry. But traders have to pay interest on MTF. But we have expiry in F&O, margin will be decided by exchange and if not maintained exchange will cut off positions. Hence, traders need to hold till expiry. Exchanges offer overdraft (OD) facility to traders via brokers. Margins need to be maintained by traders.
Recently, HDFC Bank caused a lot of losses for traders as its scrip feel steeply,” said GV Satyanarayana, a senior market analyst.
Latest Icra Ratings’ report reveals that margin trading book position at brokerage firms rose over 90 per cent to Rs54,537crore this month. Traders need to pay upto 15 per cent interest on MTF. This coupled with taxes and profit margin will be something that requires lot of money management and trading skills for traders.
Generally the stock markets are driven by sentiment, technicals and macro data. Ayodhya Shri Ram mandir inauguration has bolstered the market sentiment, while the latter two factors have already been supporting the bullish bias. The market is set for next level rally, however, the headroom is limited this truncated week comprising only three sessions as there’s no trading on Monday and Friday (January 26).
“It’s estimated that Rs1 lakh crore business done in Ayodhya on account of inaugural ceremony. Further, it will also boost all sectors thus building investor sentiment. Infrastructure comprising express ways, railways, hospitality, tourism and retail sectors will get a major boost not only in Ayodhya, but also across UP. It’ll add to national GDP, thus boosting the investor sentiment,” observes GV Satyanayarayana, senior market analyst.
“Ayodhya Ram mandir inauguration will definitely going to add a significant number to the GDP and the impact can be seen in a mid-long term. As we talk on chart Nifty is trading somewhere near to support and expected to trade sideways for some sessions as long waited correction is already witnessed in last few sessions,” adds Bisht.
The domestic markets are hovering at all-time highs.
Further, February F&O series is going to be longer one as it would be 35-day long series. It’s a leap year and January F&O expiry early closure on Thursday (January 25) and February F&O will last till February 29. “Longer F&O expiry will also result in preference to hold positions by traders. Vote on account budget will not disappoint investors,” said Satyanarayana.
