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Informist, Friday, Aug 16, 2024

By Anshul Choudhary

MUMBAI – Traders added long positions after the Nifty 50 posted strong gains, gaining 1.7% today. Positioning in options suggests that the Nifty 50 may extend these gains next week as it has closed significantly above 24400 points, considered a strong resistance by several analysts.

The sentiment was positive after fresh economic data in the US gave investors confidence that recession fears for the US economy might have been overblown. US retail sales in July rose higher than expected, reinforcing confidence in consumer demand, while jobless claims declined from a week ago, showing that the US labour market hasn't weakened drastically. Owing to this, markets in the US, Europe and Asia were higher. India's Nifty 50 gained nearly 400 points to close at 24541.15 points.

Traders bought in-the-money and at-the-money call options amid hopes of a further rise. "With the Nifty breaking out of its consolidation phase, it appears poised to close the gap around the 24,700 level," Ajit Mishra, senior vice president of technical research at Religare Broking, said.

Further, short covering was also seen at call options of 24400 strike prices and below. The maximum open interest addition was seen at 26550 calls. A significant addition to open interest was witnessed at 24700-25000 calls. Premiums at 24700 calls rose 54 rupees to 71 rupees and at 24800 calls gained 30 rupees to 40 rupees. 

However, traders continue to sell call options above 25000 strike prices amid concerns that expensive valuations may affect returns going ahead. "The Indian market offers very little value across sectors and stocks, with parts of the market trading at fair valuations, parts at full valuations and parts at frothy valuations," Kotak Institutional Equities said in a note today.

Despite expensive valuations across sectors, hopes of strong domestic economic growth and healthy inflows from mutual funds are likely to limit any fall.

For put contracts expiring next week, premiums declined with traders selling contracts across the board. The maximum open interest addition was seen at 24500 strike prices, followed by 24300-24400 strike prices. These levels will likely act as support for the Nifty 50 when markets open next week.

The August futures contract of the Nifty 50 closed at a premium of 56.90 points to the spot index. According to provisional data, open interest in the contract rose 0.3% to 11.56 mln.

--Nifty 50 Aug closed at 24598.05, up 423.40 points; 56.90-point premium to spot index

--Nifty 50 Sep closed at 24718.05, up 410.40 points; 176.90-point premium to spot index

--Nifty 50 Oct closed at 24839.50, up 405.05 points; 298.35-point premium to spot index

HDFC Bank, Reliance Industries, ICICI Bank, Hindustan Aeronautics, Tata Motors, Tata Consultancy Services, State Bank of India, Mahindra & Mahindra, Infosys, Aurobindo Pharma, Wipro, and Axis Bank were among the most actively traded underlying contracts.  End

Edited by Saji George Titus

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