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Informist, Monday, Nov. 25, 2024

By Apoorva Choubey

MUMBAI – Traders added long positions to the November and December futures of the Nifty 50 as state election results and expectation of MSCI index-related foreign fund inflows into Indian equities boosted sentiment, according to analysts. Put writing in index options too, picked up, which indicates the return of some bullish bias, as does the roll-over of long positions in index futures, they said. 

Indian equities are expected to witness a net inflow of around $2.5 billion in passive flows from foreign institutional investors with the quarterly rejig in the MSCI indices slated to occur later in the day. Moreover, the landslide victory of the Bharatiya Janata Party-led Mahayuti alliance in the Maharashtra assembly election fuelled hopes of a pick-up in government projects and overall capital expenditure. 

Open interest in the December futures of the Nifty 50 jumped 38% to 3.2 million while that in the November contract rose 3% to 10.3 million. Some covering of short positions was seen in the November futures, derivatives analysts said. The Nifty 50 closed at 24221.90 points, up 1.3% or 314.65 points. 

"The relief rally backed by robust short covering ahead of the monthly expiry this week continued for a second straight session..." said Prashanth Tapse, senior vice-president of research at Mehta Equities. The enthusiasm after the Maharashtra assembly election win of the BJP and its allies gave equity markets a boost on expectations that infrastructure projects would get a fresh leg-up, he said.

Options data reflect a balanced sentiment, with notable call and put writing at key levels, said Dhupesh Dhameja, derivatives analyst at SAMCO Securities, in a note. There has been significant call writing in the Nifty 50 over the last few weeks, as risk aversion had gripped global financial markets due to prevalent geopolitical tensions, global macroeconomic issues, trade uncertainties, and slowdown in growth.

The rise in the dollar and US Treasury yields added to the pessimism, as did the fear that US President-elect Donald Trump's aggressive trade policies could drive global inflation higher, at a time when the US Federal Reserve has made it clear that it is in no hurry to cut interest rates. As a result, foreign funds have been selling emerging market equities over the past few months.

Even now, bearishness has not left the equity market, but some buying may be starting to kick in due to several stocks and indices remaining in oversold zones for a few days. Foreign investors and domestic institutions have cut down long positions in index futures to a great extent, according to Axis Securities.     

A breakout above the 24400–24500 level may trigger short-covering in the Nifty 50 and propel the index toward 24900–25000, Dhameja, of SAMCO, said. On the flip side, failure to sustain above 23900 could invite intensified selling, pulling the index toward 23500–23300, he said.

Traders bought call options of the Nifty 50 across most strikes, barring deep-out-of-the-money options, which signals that gains in the index are seen capped. Put options of the Nifty 50 were sold.

--Nifty 50 Nov closed at 24301.50, up 414.95 points; 79.6-point premium to spot index

--Nifty 50 Dec closed at 24441.05, up 418.15 points; 219.15-point premium to spot index

--Nifty 50 Jan closed at 24590.05, up 400.10 points; 368.15-point premium to spot index

HDFC Bank, Reliance Industries, ICICI Bank, Bharti Airtel, State Bank of India, Infosys, Axis Bank, Mahindra & Mahindra, Larsen & Toubro, Kotak Mahindra Bank, Tata Consultancy Services, Tata Motors, Bajaj Finance and Hindustan Aeronautics were the most actively traded contracts.  End

Edited by Rajeev Pai 

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