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Informist, Friday, Jul 26, 2024

By Anshul Choudhary

MUMBAI – Traders added long positions and covered their short positions as the Nifty 50 surged nearly 2% today after declining for five straight days. Positioning in options suggests the 50-stock index is expected to cross 25000 points soon, and even after today's surge, downside is seen limited. 

"Continuation of government capex is positive, along with their support for consumption," said Vinit Bolinjkar, head of research at Ventura Securities. "Monsoon has been good, orders (from government) are set to pick up...we expect much better earnings in Q2 (Jul-Sep) and beyond." Today, the Nifty 50 closed 1.8% higher at 24834.85 points--its highest closing level yet. 

Apart from this, unabated inflows from mutual funds, signifying retail participation, are being touted as a major reason for gains in markets even as the government increased capital gains tax on equity shares during the Budget. "A few years ago, it would have been hard to believe that an increase in LTCG (long-term capital gains) and STCG (short term capital gains) taxes would be dismissed by the market within one hour, with the week still ending on a positive note. This resilience highlights the robust retail participation in the market," said Krishna Appala, a senior research analyst at Capitalmind Research.

Strong gains in the spot market were surprising for several technical analysts. Traders bought call options and sold put options across the board and positioning also suggests traders have covered their short positions. The highest open interest addition was at 25100-25200 calls, which is likely to act as immediate resistance. Premiums at 25100 calls surged by nearly 40 rupees to 44 rupees and at 24900 rose 107 rupees to 122 rupees.

The highest open interest addition on the put side was at 24500-24600 strike prices, which are likely to act as immediate resistance. Premiums at 24500 puts fell 170 rupees to 34 rupees and that of 24600 rupees fell 216 rupees to 49 rupees.

The Aug futures contract of the Nifty 50 closed at a premium of 80.25 points to the spot index. Open interest in the contract rose 10.6% to 14.40 mln, according to provisional data.

--Nifty 50 Aug closed at 24915.10, up 459.70 points; 80.25-point premium to spot index

--Nifty 50 Sep closed at 25030.00, up 449.15 points; 195.15-point premium to spot index

--Nifty 50 Oct closed at 25155.05, up 266.50 points; 320.20-point premium to spot index

HDFC Bank, ICICI Bank, Reliance Industries, Shriram Finance, Tata Motors, Tech Mahindra, Axis Bank, State Bank of India, Ashok Leyland, Infosys, and Tata Power Co were among the most actively traded underlying contracts.  End

Edited by Akul Nishant Akhoury

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