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Informist, Monday, Jul 15, 2024

By Anjana Therese Antony

MUMBAI – Ahead of Bajaj Auto's June quarter earnings on Tuesday, bullish bets were placed in the options chain of the two-wheeler major today, with traders buying some out-of-the-money calls and selling puts. Premiums on these call options increased by over 70%, while those on put options declined by around 25%.

Shares of Bajaj Auto closed nearly 243 rupees or 2.6% higher at 9,673.35 rupees on the National Stock Exchange. The stock was the fourth-largest gainer on the Nifty 50. The stock has risen 1.5% in the last seven days and 99% in 52 weeks. Support for the stock is pegged at 9,400 rupees in the short term and resistance is seen at 9,900 rupees, a technical and derivatives analyst at a domestic broking firm said.

The Pune-based company is expected to post 17% on-year growth in net profit to 19.53 bln rupees for the June quarter, and revenue is seen rising 14% from a year ago to 117.24 bln rupees, according to the average of estimates of nine broking firms. Sequentially, however, these metrics may see a muted rise, with net profit seen increasing 1% and revenue growing 2%.

Despite strong earnings for the March quarter, the stock had declined due to its expensive valuation. Experts had then said that the stock may give muted returns in the current financial year as the market has discounted most of the positive factors of the company. The stock had outperformed its peers in the automobile space during the previous financial year and the company gave consistent double-digit earnings growth during the same time period.

In the stock's options chain, premiums on 9,700-11,000 calls expiring on Jul 25 rose 68-73%, while those on 9,600-9,100 puts fell 38-45%. The maximum open interest addition was at 11,000-rupee call and 9,400-rupee put. In the futures segment, open interest in the July series of the stock declined 0.6% to 2.21 mln.

Meanwhile, the Nifty 50 rose to new record intraday and closing highs today and the BSE Sensex closed at a record high, with gains in shares of information technology, financial, and automobile companies providing support. The Nifty 50 hit a record intraday high of 24635.05 points and closed 0.4% higher at 24586.70 points. The BSE Sensex rose to an intraday high of 80862.54 points and ended the session 0.2% higher at 80664.86 points.

The near-term support for the 50-stock index is pegged at 24500 points and resistance at 24700 points. Analysts said there could be intermittent corrections, though the medium-term approach of investors is likely to remain bullish. The June quarter earnings season and the Union Budget next week would provide cues for investors, they said.

This time, experts expect a slowdown in earnings growth for many companies, especially in the Nifty 50 universe, due to tepid demand trends. Investors are likely to watch out for management comments on their plans to improve financial performance and business outlook. Also, expensive valuations are likely to keep the gains under check.

In the Union Budget, it is widely expected that the Narendra Modi-led government will stick to its earlier agenda, while some more focus would be given to populist reforms, analysts said. "The impact of the Union Budget on the equity market has reduced notably over the past few years with the government undertaking most of the reforms outside the purview of the Budget," Axis Securities said in a pre-Budget note. "As it is the first full-year budget after the formation of the NDA (National Democratic Alliance) 3.0 government, market participants continue to view it as a critical catalyst stimulating the Indian economy's growth and thereby the Indian market," it added.

Coming back to the options chain of the Nifty 50, premiums on 24600-24850 call rose 2-29%, while premiums on options above 24850 strike declined, indicating that sharp gains are unlikely, especially ahead of the weekly expiry on Thursday. On the put side, premiums on 24600-23800 contracts declined 42-50%. The July futures series of the Nifty 50 closed at a premium to the spot market and open interest rose 4.2% to 14.5 mln.

--Nifty 50 Jul closed at 24622.05, up 100.45 points; 35.35-point premium to spot index

--Nifty 50 Aug closed at 24744.85, up 101.85 points; 158.15-point premium to spot index

--Nifty 50 Sep closed at 24860.00, up 92.70 points; 273.30-point premium to spot index

State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Oil and Natural Gas, Infosys, HCL Technologies, Tata Consultancy Services, Vedanta, Maruti Suzuki India, Asian Paints, Kotak Mahindra Bank, and GAIL India were among the most actively traded contracts. End

Edited by Ashish Shirke

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