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Informist, Wednesday, Aug 7, 2024

By Anjana Therese Antony

MUMBAI – Traders bought some out-of-the-money call options of the Nifty 50 ahead of the Monetary Policy Committee's interest rate decision due Thursday. Meanwhile, they sold puts, premiums of which tumbled over 70% ahead of the weekly expiry on Thursday. The Reserve Bank of India is widely expected to retain the repo rate at 6.50% for the ninth consecutive time. Market participants will focus on whether the apex bank continues with its 'withdrawal of accommodation' stance as well as on the future trajectory of interest rates, analysts said.

Today, the domestic market rebounded after three days of losses due to global woes, including the fear of a recession in the US, the unwinding of yen carry trades, the unrest in Bangladesh, and geopolitical tensions in West Asia. However, there was a sigh of relief among investors following San Francisco Fed President Mary Daly's comment on Monday that the US economy is "not falling off a cliff" and that the central bank is "open to adjusting policy rates in the coming meetings". 

Similarly, the Bank of Japan's comment that it will be more cautious about the timing of the next rate hike, in the wake of volatility in global financial markets, provided some relief to global markets, including India.

However, a few analysts remained cautious and said there is more room for a further correction in the Indian market, considering that global uncertainties have not settled yet. "Directionally, I'm still not convinced that we (the market) have met the bottom... As long as India VIX does not settle below 13, I think this volatility will continue," Brijesh Ail, head of technical and derivatives analyst at IDBI Capital Markets & Securities, said. The India VIX closed near 14% lower at 16.1700 today, down for the second straight session. 

The Nifty 50 closed 1.3% higher at 24297.50 points and the BSE Sensex ended 1.1% higher at 79468.01 points. The support for the 50-stock index is pegged at 24200-24100 points and resistance at 24300-24500 points for the short term, according to some technical and derivatives analysts at various broking firms. 

In the options chain of the Nifty 50, premiums on call options in the range 24300-24600 strikes expiring Thursday fell 52-86%, while those on strikes above 24600 calls declined, indicating that sharp gains are not expected. On the puts side, premiums across strikes tumbled over 70%. The maximum open interest addition was at 24700-point call and at 24100-point put. 

When it comes to the futures contracts, the August series followed the movement in the cash market and closed 1.3% higher, at a 75.60-point premium to the spot level. Traders exited some long positions and open interest declined 4.4% to 12.85 mln. On Tuesday, foreign investors increased their short positions in index futures to 43% from 40% on Monday, hinting at some bearishness. They added more than 11,800 short positions and exited over 19,600 longs, analysts said. 

--Nifty 50 Aug closed at 24373.10, up 316.20 points; 75.60-point premium to spot index

--Nifty 50 Sep closed at 24500.00, up 320.15 points; 202.50-point premium to spot index

--Nifty 50 Oct closed at 24625.00, up 303.75 points; 327.50-point premium to spot index

HDFC Bank, ICICI Bank, Cummins India, State Bank of India, Oil & Natural Gas Corp, Lupin, IndusInd Bank, Vedanta, Tata Power, Hindustan Aeronautics, Reliance Industries, Power Finance Corp, Tata Motors, Axis Bank, Kotak Mahindra Bank, Coal India, and Bharti Airtel were among the most-actively traded underlying contracts.  End

Edited by Tanima Banerjee

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