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Informist, Friday, Sep 6, 2024

By Anjana Therese Antony

MUMBAI – The selling pressure in State Bank of India's shares, prompted by bearish views from Goldman Sachs, made traders aggressively buy put options today. The broking firm reportedly said the bank faces multiple headwinds going forward as its return on assets peaks. It also expects a valuation de-rating for the lender, ET Now reported, attributing the brokerage house.

The foreign broking firm downgraded the rating to 'sell' from 'neutral' earlier and also reduced the target price to 742 rupees from 841 rupees. The stock closed 4.4% lower at 782.50 rupees on the National Stock Exchange today and the trading volume rose 379% to 40.22 mln from the previous session. Goldman Sachs also reportedly said the public sector bank's profitability has peaked and the growth seems to be under pressure now, adding that the asset quality headwinds are building up. 

Following this, bears took over the options chain of SBI and added short bets. Premiums on puts in the range of 780-710 rupees expiring on Sep 26 increased a whopping 372-650%, while those on 780-890 rupees declined 36-53%. The maximum open interest addition is at 800-rupee call and 780-rupee put.

The fall in SBI contributed to 0.1% losses in the benchmark Nifty 50 which closed 1.2% lower at 24852.15 points. The BSE Sensex closed 1.2% lower at 81183.93 points. The 50-stock index breached its strong support of 25000 after five consecutive sessions. The near-term support for the index is pegged at 24600-24550 points and resistance is seen at 25000 points, according to technical and derivatives analysts.

Analysts said the stretched valuation may limit the market's upward movement for a couple of more session, along with unsettled worries about a likely recession in the US. Global markets also saw a sell-off and there were some caution ahead of the US employment report for the month of August. The data, among others, have been widely tracked by investors to get some clue on the US Federal Reserve's interest rate decision in its meeting on Sep 18. 

A surge in the fear gauge, India VIX, also hinted at a near-term nervousness in the domestic market. The volatility index ended the session 7% higher at 15.2175. 

In the options chain of the Nifty 50, premiums on 24850-24000 puts expiring next week rose more than 250%, while those on 24850-25800 calls fell 38-57%. The highest open interest addition was at 25000-point call and 22350-point put. The September series of the Nifty 50 closed 1.3% lower and open interest declined over 1% to 14.71 mln. On Thursday, foreign investors exited over 15,000 long positions in index futures and added more than 4,700 short positions.

--Nifty 50 Sep closed at 24909.40, down 327.35 points; 57.25-point premium to spot index

--Nifty 50 Oct closed at 25047.00, down 325.80 points; 194.85-point premium to spot index

--Nifty 50 Nov closed at 25154.05; down 340.80 points; 301.90-point premium to spot index

State Bank of India, Reliance Industries, HDFC Bank, ICICI Bank, Vodafone Idea, Bajaj Finance, Indus Towers, Infosys, Tata Motors, SBI Cards and Payment Services, Axis Bank, ITC, Larsen & Toubro, Hindustan Aeronautics, and Coal India were among the most-actively traded contracts. End

Edited by Akul Nishant Akhoury

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