MUMBAI: A key test for the market’s near-term direction will come on Monday, when equity derivatives expire and investors decide whether to take delivery of stocks or roll over positions, an indicator analysts say could signal whether recent declines find support or extend.
The expiry comes against the backdrop of an escalating war in West Asia and a sharp rise in crude prices that have already pushed the Nifty down 9.4% from 25,178.65 at the end of last month, when the conflict began, to 22,819.6 on Friday, 27 March.
Analysts say the extent of physical settlement, where traders take delivery of shares rather than closing out or rolling over their positions, will offer a read on market conviction at current levels.
Rollover of positions on the country’s largest exchange, the National Stock Exchange (NSE), typically happens on the last Tuesday of every month. With markets shut on Tuesday for Mahavir Jayanti, the rollover will take place a day earlier, on Monday.
“Investors or traders opting to exercise or physically settle their stock options and futures upon monthly expiry could provide an element of support to the market,” said Kruti Shah, quant analyst at Equirus Securities.
If, instead, traders close out positions or roll them over to the next month, it would signal more short aggression, Shah said. An investor converts stock futures or options into shares in the belief that prices could rise; low conversion, in the current context, would imply expectations of further downside.
According to data from the Securities and Exchange Board of India (Sebi), of the total stock futures settled in February, only 1% resulted in delivery, with the rest cash settled. This was higher than the 0.8% that resulted in delivery in the current fiscal year (FY26) through February on the NSE.
Of the total stock options settled in premium terms, 12% resulted in delivery, compared with 14% during the current fiscal through February. The rest was cash settled. Stock option settlement values are significantly higher than stock futures.
Premium refers to the price of a call or put option paid by the buyer to the options seller.
Sebi mandated compulsory delivery for stock futures and options on expiry from April 2018. Earlier, these contracts were cash settled, with only the difference between buy and sell positions exchanged.
“Conversion of stock futures and options to delivery reinforces a belief in markets getting support,” agreed Rajesh Palviya, senior vice president (research) at Axis Securities.
Downside risks
Still, Palviya said the market could test the 22,500 level on Monday amid uncertainty over the trajectory of the conflict, with the US having deployed airborne troops to the region, where fighting has so far remained aerial.
“If a ground invasion happens it would spell more trouble for global markets, including ours, because of the crude oil factor,” Palviya explained.
On Friday, Indian equities ended in the red after a two-day rally, tracking a global selloff as sentiment weakened amid the ongoing conflict and rising crude oil prices. Benchmark Nifty 50 and Sensex closed at 22,819.60 and 73,583.22 respectively, each down 2% over the previous session.
The war began on 28 February 2026, when Israel, with US backing, struck Iran, triggering missile retaliation and a wider regional conflict.
Brent crude has jumped 45% to $105.32 a barrel since the beginning of the war, weighing on equities and pushing the Nifty down over 9% over the same period, according to data from Bloomberg.
“A further rise in (crude) price could result in markets sliding further below the key support of 22,734 and heading toward 22,500 and then on to its 52-week low,” Palviya added.
The 52-week low stands at 21,743.65, hit on 7 April 2025 amid fears of a global tariff war. From there, the market recovered to a record high of 26,373.65 on 5 January 2026 on expectations of a rebound in corporate earnings, supported by rate and income tax cuts.
The market has since fallen 13.5% on concerns over artificial intelligence (AI)-led job losses and the war in West Asia.
“The threat of delivery on expiry day obviates over speculation by traders who don't have the capital or shares to take or give delivery,” said Sudhir Joshi, consultant at Khambatta Securities.
Participants in stock futures and options include retail and high net-worth individuals, foreign portfolio investors, domestic institutional investors and proprietary brokers, according to NSE data.