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Informist, Friday, Aug 2, 2024

By Anshul Choudhary

MUMBAI – Traders sold call options and bought put options as the Nifty 50 fell today after investors booked profits amid weak global cues. Positioning in options suggests a fall in the Nifty 50 may extend to 24500 points and any sharp recovery from today's fall is unlikely. 

Indices fell today after there was a sell-off in the global markets as the number of new applications for unemployment claims increased by 14,000 to 249,000 last week. Further, the Institute for Supply Management's manufacturing PMI dropped to an eight-month low in July at 46.8, Reuters reported. This raised concerns that the US economy may be slowing faster than anticipated. 

Back home, the fear gauge India VIX rose nearly 11% to 14.32. The Nifty 50 witnessed its first weekly fall after rising for eight consecutive weeks. Heavyweights such as Larsen & Toubro, Reliance Industries, ICICI Bank, and Infosys were down. Further, disappointing automobile sales data for July exacerbated the decline in some automobile stocks which led to the Nifty 50 falling 1.2% today to close at 24717.70 points.

Even as valuations remain on the higher side, expectations of better earnings growth in the remaining quarters of this financial year are likely to limit the fall. Further, there are expectations that the US Federal Reserve may cut interest rates in its September meeting, which is likely to lift sentiments further.

For the options contracts expiring next week, the maximum open interest was seen at 24000-24100 puts, followed by 24500 puts. Premiums across the board rose, with those on 24800 puts rising 154 rupees to 234 rupees, and those on 24500 increasing 68 rupees to 95 rupees.

With benchmark indices falling today, traders sold call options with premiums down across the board. The maximum open interest addition was seen at 24800-25000 call options and the index is likely to face resistance at these levels. Premiums on 24800-25000 were down around 40%. However, there was some buying in deep out-of-the-money call options.

The August futures contract of the Nifty 50 closed at a discount of 17.70 points to the spot index. Open interest in the contract fell 0.4% to 15.61 mln, according to provisional data.

--Nifty 50 Aug closed at 24700.00, down 332.25 points; 17.70-point discount to spot index

--Nifty 50 Sep closed at 24830.00, down 317.60 points; 112.30-point premium to spot index

--Nifty 50 Oct closed at 24961.95, down 302.10 points; 244.25-point premium to spot index

HDFC Bank, Tata Motors, State Bank of India, ICICI Bank, Maruti Suzuki, Reliance Industries, Adani Enterprises, Cummins India, Infosys, Hindustan Aeronautics, ITC, and Tata Power Co were among the most-actively traded underlying contracts.  End

Edited by Aditya Sakorkar

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