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Informist, Tuesday, Oct. 29, 2024

By Anjana Therese Antony

MUMBAI – Concern about rising inventory and a soft demand environment made traders place short bets in the derivatives chain of most automobile companies, following the fall in their stock prices Tuesday. Premiums on deep out-of-the-money call options of large-cap automobile companies--such as Tata Motors, Maruti Suzuki India, and Hero MotoCorp--declined and those on put contracts increased. Traders also exited some long positions from the October futures series expiring this week. 

The passenger vehicle inventory has now reached historical high levels of 80–85 days, which is equivalent to 790,000 vehicles worth INR 790 billion, as per data by the Federation of Automobile Dealers Associations released early in October. The extended intraday fall in most auto stocks also came after Maruti Suzuki reported a slightly lower-than-expected net profit growth for the September quarter, while revenue was largely in line with estimates. The company's inventory level is expected to fall to around 30 days by the end of this month, but this may not push the automaker to give discounts during the December quarter, its management said in a post-earnings call Tuesday. The fall in auto stocks also made Nifty Auto the worst sectoral laggard and close 1.6% lower at 23588.60 points. 

Shares of Maruti Suzuki closed 3.8% lower at INR 11,046 on the National Stock Exchange. In its options chain, premiums on INR 11,100-11,500 call options expiring Thursday declined 82-90% and those on INR 10,800-9,800 puts rose 9-51%. The maximum open interest addition was at INR 11,500 call and INR 10,000 put options. A similar trend was seen in the derivatives chain of Tata Motors and Hero MotoCorp. 

Traders also exited some long positions in the futures series of most auto companies, with open interest in Tata Motors falling 3.3% to 63.11 million and Maruti Suzuki declining 0.5% to 2.72 million. 

The fall in the auto stocks limited the upside in the benchmark equity indices that closed 0.5% higher. The Nifty 50 closed at 24466.85 points and the Sensex ended at 80369.03 points, up for the second straight session after four weeks of fall. The near-term support for the 50-stock index is pegged at 24100 points and resistance at 24500-24600 points. 

The Indian market had fallen recently due to persistent foreign outflows and weaker-than-expected earnings for Jul-Sept. Analysts do not expect the domestic equity market to continue its northward journey as the near-term cues are not in favour of bulls, with expensive valuations, slowdown in earnings growth, and fund outflows weighing on the sentiment. 

--Nifty 50 Oct closed at 24470.10, up 121.65 points; 3.25-point premium to spot index

--Nifty 50 Nov closed at 24615.50, up 133.45 points; 148.65-point premium to spot index

--Nifty 50 Dec closed at 24760.10, up 120.10 points; 293.25-point premium to spot index

HDFC Bank, ICICI Bank, Reliance Industries, Mauti Suzuki India, State Bank of India, Tata Motors, Infosys, Axis Bank, Bajaj Finance, Kotak Mahindra Bank, Bharti Airtel, Mahindra & Mahindra, Tata Consultancy Services, and Adani Enterprises were the most actively traded contracts.  End

Edited by Akul Nishant Akhoury

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