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Informist, Tuesday, Aug 13, 2024

By Anshul Choudhary

MUMBAI – A lower-than-expected increase in HDFC Bank's weight in index provider MSCI's latest rejig led to an over 3% fall in the stock today. However, further fall is unlikely with positioning in options suggestinh the stock may find support at 1,600 rupees. Today, the stock closed at 1,603.20 rupees.

Market participants expected the stock's weight to double in the MSCI's indices as part of the latest rejig. However, the index provider made an exception for HDFC Bank, considering its already significant weight, and decided to raise its weight in two tranches. In the August rejig, MSCI raised the adjustment factor to 0.75 from 0.5, while the market had expected it to rise to 1. MSCI said that it will consider raising the adjustment factor to 1 in November, if the room for foreign investors in their shareholding remains above 20%.

Considering the lower increase in the stock's weight, Nuvama Alternative & Quantitative Research also cut its inflow projections from the rejig. Now, the brokerage expects foreign inflows of $1.8 bln post the August rejig, which comes into effect from Sep 2. The brokerage had expected inflows of $3.2 bln-$4.0 bln in its report in July.

However, analysts remain positive on the stock, with Nuvama mentioning that it expects the remaining increase in weightage to happen in the next rejig on Nov 6.

Traders bought put options and sold call options after today's fall in HDFC Bank. However, the maximum open interest was at 1,600 put options and this level is likely to act as immediate support.

If the stock manages to recover, it could face resistance at 1,700 rupees, around 6% higher than today's close. The maximum open interest on the call side was at 1,700 strike prices, followed by 1,650 strike prices.

For the Nifty 50 derivatives expiring Wednesday, traders sold call options and bought put options as the Nifty 50 fell today. Data suggest the index may fall more with the 23900 puts witnessing the highest open interest addition, indicating a fall of nearly 1% from today's close of 24139 points. The Nifty 50 closed 0.9% lower today.

On the call side, the maximum open interest addition was seen at 24300 strike prices, which could act as a resistance level for the index. Global cues remain of the utmost importance for the Nifty 50 to break resistance levels. All eyes are now on Wednesday's inflation data in the US, which will help assess the interest rate trajectory in the US.

The August futures contract of the Nifty 50 closed at a premium of 19.50 points to the spot index. Open interest in the contract rose 3.6% to 12.12 mln, according to provisional data.

--Nifty 50 Aug closed at 24158.50, down 198.30 points; 19.50-point premium to spot index

--Nifty 50 Sep closed at 24300.00, down 192.30 points; 161-point premium to spot index

--Nifty 50 Oct closed at 24425.00, down 195.25 points; 286-point premium to spot index

HDFC Bank, ICICI Bank, State Bank of India, Aarti Industries, Kotak Mahindra Bank, Axis Bank, Samvardhana Motherson International, Reliance Industries, Adani Enterprises, and Tata Motors were among the most-actively traded underlying contracts.  End

Edited by Tanima Banerjee

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