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Informist, Wednesday, Sep 4, 2024

By Anjana Therese Antony

MUMBAI – Anticipating further weakness in the Indian equity market, traders picked up out-of-the-money put contracts of the Nifty 50 today. The index fell after weak US manufacturing data sparked worries of a slowdown in the world's largest economy, which shook equities across the globe.

The renewed panic caused a sell-off in shares of companies primarily exposed to the US, including those in the information technology space, which was among the major laggards today. Investors have been aggressively tracking US economic data to derive clues on the interest rate trajectory in the US. Though the US Federal Reserve, in its previous policy meeting, hinted at a rate cut in September, weak US economic data has been causing jitters in the global market.

However, views on the quantum of rate cuts in the US are varied, with some anticipating a 25-basis-point reduction this month, while others betting on a 50-bps cut. Now, all eyes will be on the US jobs report, due on Friday. 

Indian equities saw a decline today after about two weeks of gains. The Nifty 50 and the BSE Sensex closed 0.3% lower each at 25198.70 points and 82352.64 points, respectively. The immediate support for the Nifty 50 is pegged at 25000 points and resistance at 25300-25400 points, according to technical and derivatives analysts. 

While the medium-to-long-term approach of investors towards the Indian stock market continues to be bullish, analysts said that expensive valuations could limit gains in the near term. The absence of domestic triggers will continue to keep investor focus glued to global updates, they said. However, recovery in rural demand, a good monsoon, interest rate cuts by major global central banks, benign crude oil prices, slowdown in inflation, and better corporate earnings will attract foreign inflows to India in the long term. 

In the options chain of the Nifty 50, premiums on put options in the range of 25200-24500 strikes expiring Thursday rose 7-41%, while those on 25200-26000 calls declined 55-59%. The maximum open interest addition is at 25200-point call and 25000-point put. Some analysts said foreign institutional investors have net short positions in index options as of Tuesday. While they continue to hold 70% long positions in index futures as of Tuesday, domestic institutional investors are said to hold short positions. 

--Nifty 50 Sep closed at 25251.00, down 103.55 points; 52.30-point premium to spot index

--Nifty 50 Oct closed at 25388.00, down 93.95 points; 189.30-point premium to spot index

--Nifty 50 Nov closed at 25500.00; down 96.30 points; 301.30-point premium to spot index

HDFC Bank, Hindustan Aeronautics, ICICI Bank, Reliance Industries, State Bank of India, Infosys, Coal India, Axis Bank, Hindustan Petroleum Corp, Kotak Mahindra Bank, Biocon, Bajaj Finance, Asian Paints, and Adani Enterprises were among the most actively traded contracts.  End

Edited by Aditya Sakorkar

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