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Informist, Wednesday, Aug 21, 2024

By Anshul Choudhary

MUMBAI – Options data suggest the pace of gains of Nifty 50 is expected to slow down over the next two days on caution over US Federal Reserve Chair Jerome Powell's speech at the Jackson Hole symposium on Friday. The market may be volatile on Thursday because of weekly expiry of derivatives contracts. However, strong domestic fundamentals, along with continued inflows by mutual funds, are likely to keep sentiment positive, pushing traders to sell put options.

The Nifty 50 today rose for the fifth straight session, gaining 2.6% during the period, tracking rise in global markets after favourable macroeconomic data from the US helped ease worries of recession. The 50-share index closed 71.35 points or 0.3% higher at 24770.20 points.

"There was fear of US getting into recession, that is kind of reduced now," said Krishna Appala, senior research analyst at portfolio management services firm Capitalmind Research. However, there is caution among some market participants ahead of Powell's speech at the Kansas City Fed's annual economic symposium in Wyoming. His speech may provide cues on the economic health of the US and the interest rate trajectory going forward.

Appala said expectations of interest rate cuts later this year may provide a trigger for inflows into emerging markets and better earnings growth in global-facing sectors such as information technology, which could give further push to the overall market.

Several other analysts also share this positive view. Positions taken in Nifty 50 options suggest traders sold puts across the board, with the maximum change in open interest seen at 24500-24750 strike prices. Premiums on put options of 24000-24700 fell 64-75%.

Among call options, out-of-the-money strikes saw addition of short bets, while at-the-money and in-the-money strikes saw buying. There was even some short covering in call options below 24700 strikes. At the same time, the maximum open interest addition was seen at 24800-24900 strike prices. These levels are likely to act as resistance on Thursday.

The August futures contract of the Nifty 50 closed at a premium of 26 points to the spot index. Open interest in the contract rose 1.1% to 10.89 mln, according to provisional data.

--Nifty 50 Aug closed at 24796.20, up 84.95 points

--Nifty 50 Sep closed at 24925.00, up 83.85 points; 154.80-point premium to spot index

--Nifty 50 Oct closed at 25046.25, up 82.05 points; 276.05-point premium to spot index

HDFC Bank, ICICI Bank, State Bank of India, Reliance Industries, Kotak Mahindra Bank, Axis Bank, Vedanta, Divi's Laboratories, Adani Enterprises, Punjab National Bank, Hindalco, and REC were among the most actively traded underlying contracts.  End

Edited by Ashish Shirke

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