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Informist, Tuesday, Aug 6, 2024

By Anjana Therese Antony

MUMBAI – The turmoil in Bangladesh, which worsened on Monday, ignited concerns about growth in the country, further turning focus on India-based Marico Ltd, which has a higher exposure to the neighbouring country. Traders wrote call options and sold puts in the options chain of Marico, indicating a further near-term fall in the stock. Premiums on out-of-the-money calls declined, while those on puts rose sharply.  

"We remain concerned about Bangladesh in Q2FY25 (Jul-Sep) ... Other FMCG companies have highlighted a significant adverse impact in Q2 (Jul-Sep) sales in Bangladesh due to massive protests," Nuvama Institutional Equities said in a post-earnings report. Marico has the highest exposure of 11–12% of consolidated business, while the exposure is small for other companies, it added. A few other broking firms also raised concerns about the unrest in the neighbouring country, which could have an impact on Marico.

On Monday, reports said Bangladesh Prime Minister Sheikh Hasina left the country after stepping down amidst anti-government protests in the country. In July, protests, which were initially peaceful, demanding the abolition of the quota system for government jobs, turned violent mid-month. It turned out to be a nationwide anti-government protest, leading to the deaths of hundreds of people and arrests of thousands. 

Today, shares of the fast-moving consumer goods player closed 6.5% lower at 628.50 rupees on the National Stock Exchange. The company released its earnings for the June quarter after market hours on Monday. Its consolidated net profit grew nearly 9% on year to 4.6 bln rupees, lower than the 4.7 bln rupees analysts had expected. Revenue rose 6.7% on year to 26.4 bln rupees, but also fell slightly short of the Street's expectation of 26.6 bln rupees. 

In the options chain of Marico, premiums on call options in the range of 630-700 rupees declined 65-75%, while those on 630-550 puts rose 90-173%. The maximum open interest addition is at 650-rupee call and 635-rupee put. The futures contracts of the stock also mirrored the loss in the stock and closed over 6% higher. The August contract ended at a 1-rupee discount to the spot level and open interest rose over 20% to 14.51 mln.

The overall domestic equity market also closed lower today after some gains during the day. Premiums across options of the benchmark Nifty 50 tumbled amid fears of a likely recession in the US, geopolitical tension in West Asia, turmoil in Bangladesh, and unwinding of yen carry trades. 

The Nifty 50 ended 0.3% lower at 23992.55 points after rising about 1.4% intraday. The support for the index is pegged at 23900-23850 points for the near term and resistance at 24300 points. 

Premiums on Nifty 50 call options in the range 24000-25000 points expiring Thursday declined 33-53% and those on 24000-23500 puts fell 31-60%. The highest concentration of open interest is at 25000-point call and 23500-point put. 

The August futures contract of the index also fell and closed slightly lower, but at a 97.45-point premium to the spot. Analysts said foreign investors are again slowly turning cautious on the domestic market. They were net sellers in five out of the six trading sessions till Monday. They exited over 11,000 long positions in index futures and added around 23,800 shorts, indicating bearishness. They hold about 60% longs and 40% short positions in index futures as of Monday.

--Nifty 50 Aug closed at 24090.00, down 12.95 points; 97.45-point discount to spot index

--Nifty 50 Sep closed at 24219.00, down 12.15 points; 226.45-point premium to spot index

--Nifty 50 Oct closed at 24345.05, down 7.15 points; 325.50-point premium to spot index

HDFC Bank, Reliance Industries, ICICI Bank, Power Finance Corp, State Bank of India, Infosys, Tata Motors, REC, Bharti Airtel, Tata Power, Cummins India, Bharat Electronics, and Vedanta were among the most-actively traded underlying contracts.  End

Edited by Vidhi Verma

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