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Informist, Thursday, Aug 22, 2024

By Apoorva Choubey

MUMBAI – Short positions in index futures were closed while put writers remained active in the Nifty 50's August monthly series as global equities are expected to remain buoyant due to growing hopes of an interest rate cut by the US Federal Reserve at its next policy review in September. The positioning in the derivatives market is reflective of bullish trends as short bets are being squared off and long bets are being added, according to analysts.

The Nifty 50's futures contract has seen a decrease in open interest of 2.98% with an increase in price of 1.41%, which indicates covering of short positions, Axis Securities said in a note. The benchmark index closed higher for the sixth straight session today, having gained nearly 3% in the last seven days, as recent data in the world's largest economy has fuelled optimism that the Fed will have to cut rates sooner than later.

Premiums of the Nifty 50's monthly put options fell 9-46%, while the maximum position base shifted higher from 24500 and 24600 strike prices to 24700 and 24800, suggesting that support for the index could be moving up. Among call options, most out-of-the-money strikes saw addition of long bets. The 25000 strike price call option was the most aggressively bought.

Option traders can initiate a "bull call" spread by buying one lot of 24800 call and selling one lot of 25000 call to continue to be with the bullish bias of the market, said Chandan Taparia, head of derivatives at Motilal Oswal Financial Services. The Nifty 50 has continued the formation of higher highs and higher lows over the last five trading sessions and is now just 380 points shy of its lifetime high of 25078 points, he added.

Today, the Nifty 50 closed at 24811.50 points, up 41.30 points or 0.2% from the previous close. The August futures of the benchmark closed at a premium of 28.50 points to the spot index. Open interest in the contract fell marginally to 10.7 mln, according to provisional data.

Moreover, India VIX has declined from 23 to 13, and the lower volatility suggests an overall bullish stance in the market, Taparia said. The volatility index closed 2.5% lower today.

While the mood in the market is upbeat, comments by US Fed Chair Jerome Powell on Friday evening at the annual economic symposium in Jackson Hole will determine if global markets sustain recent gains, warned some experts. The Put-Call Ratio has eased from 1.10 on Wednesday to 0.88, signalling a slight bearish shift as the index approaches resistance levels of 24800-25000, cautioned analysts at SAMCO Securities. 

--Nifty 50 Aug closed at 24840.00, up 41.85 points

--Nifty 50 Sep closed at 24967.70, up 44.85 points; 156.20-point premium to spot index

--Nifty 50 Oct closed at 25080.00, up 37.40 points; 268.50-point premium to spot index

HDFC Bank, ICICI Bank, Vodafone Idea, InterGlobe Aviation, Indus Towers, RBL Bank, Tata Motors, State Bank of India, Reliance Industries, Infosys, Hindustan Aeronautics, Vedanta and Bharti Airtel were among the most actively traded underlying contracts.  End

Edited by Rajeev Pai

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