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Informist, Tuesday, Oct. 1, 2024

By Apoorva Choubey

MUMBAI – Traders bought out-of-the-money call options and October futures of Tech Mahindra, suggesting they expect further gains in the stock. The bullishness was seen Tuesday after brokerage CLSA Asia Pacific Markets reportedly upgraded its rating on the shares to "outperform" from "hold". 

The INR 1,640 through INR 1,840 call options were bought aggressively, and premiums of these out-of-the-money call options jumped 34-51%. Within call options, the 1,640 and 1,700 strike prices were the most actively bought and now hold the maximum open interest.

Open interest in the October futures of Tech Mahindra jumped 1% to 12.8 mln, as long positions were added, and the contract closed 2.7% higher. Shares of the company closed 3% higher at INR 1,625.40.

CLSA also raised its price target for Tech Mahindra's shares by 8% to INR 1,749. According to reports, CLSA said Tech Mahindra is already seeing an expansion in its operating margin, with the next key milestone being the order book.

The financial services, healthcare, and manufacturing sectors are expected to drive most of this growth, the brokerage reportedly said. The strong outlook by CLSA prompted traders to sell the put options of Tech Mahindra, indicating that the stock is expected to sustain the uptrend. 

Meanwhile, traders sold call and put options of the Nifty 50 across expiries as they remain unsure of the market's likely movement in the coming days. After the benchmark indices hit fresh lifetime highs last week, Indian equities have seen some sell-off in the backdrop of geopolitical tensions rising in West Asia, a rebound in Chinese markets due to a government stimulus, and caution ahead of the start of the earnings season.
 

The Nifty 50 closed 0.1% lower at 25796.90 points Tuesday. Open interest in the October futures of the Nifty 50 fell 1.3% to 14.7 mln, and the contract closed at a premium of 179.50 points to the spot index, on a provisional basis. 

Markets will be closed Wednesday for Gandhi Jayanti. "Overall we expect the market to consolidate with stock-specific action as we enter into results season and companies will announce pre-quarterly updates," said Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services Ltd. In the near term, investors will take cues from US jobs and manufacturing data, he said. 

--Nifty 50 Oct closed at 25976.40, down 13.75 points;

--Nifty 50 Nov closed at 26108.00, down 15.80 points; 311.10-point premium to spot index

--Nifty 50 Dec closed at 26240.00, down 2.85 points; 443.10-point premium to spot index

Reliance Industries, HDFC Bank, ICICI Bank, State Bank of India, Axis Bank, Kotak Mahindra Bank, National Aluminium Co., Mahindra & Mahindra, Tata Motors, Polycab India, Infosys, Punjab National Bank and Tech Mahindra were among the most-actively traded contracts.  End

Edited by Rajeev Pai

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