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Informist, Thursday, Sep 12, 2024

By Anjana Therese Antony

MUMBAI – With the latest US inflation data coming in line with expectations and cementing hopes of a 25-basis-point rate cut in the world's largest economy next week, traders covered their short positions in the Nifty 50 and added long ones, analysts said. "Earlier, there was some confusion about whether there will be a rate cut and if so, by how much...the (US) CPI data is hinting at a sure cut this time," a research analyst at a broking firm said. 

Today, cheer around such a rate cut lured investors, leading to a sharp rise in benchmark indices, which hit record intra-day and closing highs. The Nifty 50 and the Sensex closed nearly 2% higher each at 25388.90 points and 82962.71 points. Immediate support for the 50-stock index is pegged at 25300-25270 points and resistance at 25450-25500 points, according to technical and derivatives analysts at different broking firms. Investors covered their short positions in heavyweight stocks ahead of the weekly expiry of options contracts today.

In the options chain of the Nifty 50, premiums on deep out-of-the-money call contracts expiring next week surged over 100%, while those on put options declined more than 70%, hinting at bullishness in the near term. The maximum open interest addition was at the 26000-point call and 24000-point put contracts. 

The futures contract of the Nifty 50 mirrored the rise in the cash market. The September contract was 1.6% higher and open interest rose a whopping 11.4% to 14.83 mln, but closed at a near 50-point discount to the spot index. 

India's CPI data for August, released after market hours today, was largely in line with expectations. This is expected to retain optimism towards the domestic market. The CPI print came in at 3.65%, lower than the Reserve Bank of India's target of 4% for the second straight time. Analysts said the medium-term growth in the Indian equity market will be supported by strong corporate earnings, a pick-up in government capital expenditure, a recovery in rural demand, benign inflation, and economic growth, among others. 

Now, all eyes will be on the US Federal Open Market Committee's meeting outcome, due on Sep 18. According to the CME FedWatch Tool, there is an 87% probability for a 25-bps reduction in US interest rates, higher than the 67% chance at the beginning of this week. 

--Nifty 50 Sep closed at 25339.00, up 400.55 points; 49.90-point discount to spot index

--Nifty 50 Oct closed at 25453.30, up 383.75 points; 64.40-point premium to spot index

--Nifty 50 Nov closed at 25575.00; up 383.55 points; 186.10-point premium to spot index

HDFC Bank, Reliance Industries, ICICI Bank, Granules India, Tata Motors, State Bank of India, Bajaj Auto, Bharti Airtel, Infosys, Tata Steel, Axis Bank, Kotak Mahindra Bank, Bajaj Finance, Larsen & Toubro, and ITC were the most-actively traded contracts.  End

Edited by Avishek Dutta

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