Equity Futures
Put buying suggests Nifty 50 may fall up to 2.5% in 2 weeks
This story was originally published at 19:43 IST on 13 November 2024
Register to read our real-time news.Informist, Wednesday, Nov. 13, 2024
By Apoorva Choubey
MUMBAI – The Nifty 50 could fall up to 2.5% more over the next fortnight if one were to go by the widespread buying being seen in the index's monthly put options and the addition of short positions in the benchmark's November futures, market participants said. The index has lost nearly 3% so far this month.
Traders continued to buy put options of the headline index across strike prices, with the 23500 option being the most actively traded. Currently, put options of 23000, 23300, 23400 and 23500 strike prices hold the maximum open interest, in the range of 3-8 million. These strikes also saw the highest volumes among all options of the index on Wednesday.
Market participants see the index testing levels of 23300 and then 23000 points over the coming two weeks, if the sell-off intensifies, said the head of derivatives at a local brokerage house. On Wednesday, the Nifty 50 ended lower for the fifth session in a row, closing at 23559.05, down 324.40 points or 1.4% from the previous close.
"With inflation once again rising sharply and breaching above the Reserve Bank of India's comfort level, receding hopes of any major rate cuts in the near future by the central bank put the markets into a tizzy," said Prashanth Tapse, senior vice president – research, Mehta Equities. The relentless selling by foreign institutional investors, due to rising US bond yields and dismal corporate earnings in India, suggests that overseas investors are parking their funds in relatively cheaper markets like China, he said.
What's more, US President-elect Donald Trump's aggressive trade policies--while good for American corporations--could mean uncertainty for other countries and drive global inflation higher, according to experts. Reflecting these concerns, India VIX surged 6% to end at 15.4350.
On the call options front, traders added short bets across strike prices, as they expect more weakness in the index, the derivative analyst said. "Increasing call writing from 24000 to 24500 signals heightened seller strength at these levels, while a decrease in put writing adds to the bearish momentum," said Dhupesh Dhameja, a derivative analyst at SAMCO Securities.
The 23700, 23750 and 23800 strike price call options were the most actively sold and also saw high volumes. Thus, these levels could act as resistance levels for the index in the coming days, according to analysts.
The sell-off in the November futures of the Nifty 50 was also indicative of the bearishness among participants. Open interest in the index's November futures rose 4% to 12.19 million. The contract provisionally ended at a premium of 137.55 points to the spot index.
Support for the Nifty 50 is now seen at 23500 and then at 23300-23200 points, said Tejas Shah, a technical analyst at JM Financial. On the higher side, immediate resistance for the index is seen at 23800, and the next psychological resistance would be at the 24000 level, he said.
--Nifty 50 Nov closed at 23696.60, down 263.00 points;
--Nifty 50 Dec closed at 23847.55, down 266.80 points; 288.50-point premium to spot index
--Nifty 50 Jan closed at 24000.35, down 272.40 points; 441.30-point premium to spot index
HDFC Bank, ICICI Bank, State Bank of India, Reliance Industries, Axis Bank, Dixon Technologies India, Tata Motors, Kotak Mahindra Bank, Hindustan Aeronautics, Bajaj Finance, Samvardhana Motherson International, Tata Steel and Mahindra & Mahindra were the most actively traded contracts. End
Edited by Saji George Titus
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