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Informist, Thursday, Nov. 14, 2024

By Apoorva Choubey 

MUMBAI – Addition of long positions in Eicher Motors' call options and November futures indicate that the stock could extend gains in the coming sessions. The bullish positioning comes after rating upgrades were seen for the company's shares early Thursday, as brokerages rushed to account for the improving prospects for the automaker's business, which is expected to witness strong growth in the next few quarters. 

Out-of-the-money call options of Eicher were bought across the chain, while put options were sold, indicating bullishness. The INR 5,000 strike price call option was the most actively bought and holds the maximum open interest of nearly 7 million.

The INR 5,000 strike price call option saw a 23% jump in number of open positions on Thursday, with a whopping 346% jump in premium. A rise to INR 5,000 would imply gains of 2.5% from current levels. 

While Nuvama Institutional Equities upgraded the stock to 'buy' from 'hold', Emkay Global raised its rating to 'buy' from 'sell', and Nomura Financial Advisory and Securities India upgraded its rating to 'neutral' from 'reduce'. Shares of Eicher Motors ended over 6% higher on the National Stock Exchange at INR 4,883.70. 

Open interest in the November futures of Eicher jumped 15% to 4.4 million. In the December and January futures too, traders added long bets, as they expect the stock to fare well, said analysts. 

Late Wednesday, the automobile company posted its best ever consolidated revenue for the September quarter. Some brokerages also raised their target price and earnings per share estimates for the next few years. 

The company witnessed healthy traction in sales during the festive season and even after that, brokerage Sharekhan said in a report. Nuvama expects a strong recovery with a 12% on-year rise in Oct-Mar sales led by strong festive demand, sharper focus on the Classic and Bullet models, new products, and a marketing push by the company. Nuvama raised the target price to INR 5,500 from INR 4,500.

Traders sold out-of-the-money call and put options of the Nifty 50 across strikes, suggesting that they remain cautious about the likely movement of the index in the coming days. The index has lost nearly 6% in the last one month, largely on account of a massive sell-off by foreign investors. 

Weak corporate earnings growth in India is bringing risk appetite even lower, at a time when the rise in the dollar and US treasury yields, along with geopolitical and trade uncertainties are all weighing on risky assets like emerging market equities, said experts. 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, investors fear. 

On Thursday, the Nifty 50 ended lower for the sixth session in a row, closing at 23532.70, down 26.35 points or 0.1% from the previous close. The index ended slightly below its 200-day double exponential moving average of 23540 points, which is seen as a sign of weakness, according to the head of retail research at a local brokerage house. 

The benchmark's 24000 through 24500 strike price call options saw aggressive writing, suggesting that traders do not see the Nifty 50 rebounding to these levels anytime soon. On the other side, the 23000 and 23300 strike price put options continue to hold the maximum open interest, as they are seen as crucial support levels. 

The sell-off in the November futures of the Nifty 50 was indicative of the bearishness among participants. Open interest in the index's November futures rose 3% to 12.3 million. The contract provisionally ended at a premium of 88.7 points to the spot index.   

On the higher side, the Nifty 50 could bounce back to 23800, said Amol Athawale, vice president of technical research at Kotak Securities. However, if the index breaches 23500 decisively, it could trigger further weakness, to levels of 23300 and 23200 in the near-term, he said. 

--Nifty 50 Nov closed at 23621.40, down 37.15 points;

--Nifty 50 Dec closed at 23774.75, down 30.80 points; 242.05-point premium to spot index

--Nifty 50 Jan closed at 23939.00, down 25.95 points; 406.30-point premium to spot index

HDFC Bank, Eicher Motors, Reliance Industries, Hindustan Aeronautics, ICICI Bank, State Bank of India, National Aluminium Co, Dixon Technologies India, Tata Motors, Infosys, Bharat Forge, Axis Bank, Mahindra & Mahindra and Kotak Mahindra Bank were the most actively traded contracts.  End

Edited by Tanima Banerjee

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