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Informist, Tuesday, Aug 27, 2024

By Apoorva Choubey

MUMBAI – Sustained put writing in the Nifty 50's weekly options and likely rollover of net long positions to the index's September futures suggest that the benchmark is poised to extend its ongoing rally further, according to derivatives analysts. The mood in the market remains upbeat due to expectation of an interest rate cut in the US soon and strong economic prospects of India, coupled with the recovery in foreign fund inflows in recent days.

Many market participants continued to roll over long positions to the September futures of the Nifty 50 today, ahead of the expiry of the August derivatives series on Thursday, according to analysts. Today, the September futures of the benchmark saw open interest jump a whopping 54% to 6 mln.  

Growing expectation of an interest rate cut by the US Federal Reserve in September has led global equities higher this month, with the Nifty 50 gaining 1.3% in the last seven days and nearing its all-time high of 25078.30 points. Recent data in the world's largest economy has fuelled optimism that the Fed will have to cut rates sooner than later, which is a positive for global liquidity and risky assets such as emerging market equities. The Nifty 50 rose at open today but gave up gains to end flat as profits were booked, said analysts.

The 50-stock index closed at 25017.75 points, up 7.15 points, ending with gains for the ninth session in a row. The August futures of the benchmark closed at a discount of 16.75 points to the spot index. Open interest in the contract rose over 2% to 9.9 mln, according to provisional data.

Rollovers to the Nifty 50's September contract were 31.23% of total positions on Monday, lower than three-month average of 32.80%, analysts at Axis Securities said in a note. The rollover cost rose marginally, they said. 

The options market reflects a bullish sentiment, with more puts being written than calls as the Nifty 50 continues to form higher highs and higher lows on technical charts, Dhupesh Dhameja, an analyst at SAMCO Securities, said. As long as the index remains above 24800 points, the bulls are in control, he said. A sustained move above 25100 could trigger a strong recovery, potentially leading to short-covering by sellers, he added.

The positioning in the index's monthly options shows high open interest at the 25500 strike price call option, followed by 25200 and 25400. Among put options, the 25000 and 24800 strike prices hold among the maximum number of open positions. Thus, the probable range for the Nifty 50's current month expiry is 24500-25200 points, according to Axis Securities.

--Nifty 50 Aug closed at 25001.00, down 42.30 points

--Nifty 50 Sep closed at 25120.20, down 45.30 points; 102.45-point premium to spot index

--Nifty 50 Oct closed at 25240.00, down 40.50 points; 222.25-point premium to spot index

HDFC Bank, Reliance Industries, ICICI Bank, Larsen & Toubro, Bajaj Finance, Axis Bank, Infosys, Vedanta, REC, Maruti Suzuki India, Tata Motors, Bharti Airtel, Kotak Mahindra Bank, Tata Consultancy Services, and ITC were among the most actively traded contracts.  End

Edited by Akul Nishant Akhoury

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