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Informist, Tuesday, Nov. 26, 2024 

By Apoorva Choubey

MUMBAI – The Nifty 50's November futures could see a weak expiry, possibly around 24200 points, going by the aggressive call writing seen in the index's monthly options, as well as the fact that foreign institutional investors remain bearish on index futures. The bullish bias seen in the positioning on Monday--triggered by the recent state election results and expectation of MSCI index-related foreign inflows--largely dissipated on Tuesday, as global trade tensions and inflation worries resurfaced.

Call options of the Nifty 50 were sold across expiries, which signals that market participants are not expecting a recovery in the index anytime soon. In the current month series, the 24200 strike price call option was the most actively sold, with volumes of over 147.2 million.

Open interest in the contract surged over 25% to 5 million, with a 36% slide in premiums, indicating that the level is seen as a hurdle before the November series expiry on Thursday. The 24300, 24400 and 24500 strike price call options were also aggressively sold, along with most other strikes. 

While the market started on a strong footing in early hours, bearishness kicked in later due to concerns over news emerging that US President-elect Donald Trump has indicated that he would impose trade tariffs on China, Mexico, and Canada. The Nifty 50 closed at 24194.50 points, down 27.40 points or 0.1%, after having opened 0.5% higher. 

There has been significant call writing in the Nifty 50 over the last few weeks, as risk aversion has 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 have added to the pessimism, along with the fear that 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.

FIIs likely added more shorts in index futures on Tuesday, after having covered bearish bets worth over $91 million in the last five days, the head of derivatives at a wealth management firm said. Foreign investors were net short on index futures to the tune of $1.23 billion as on Monday, according to a report by Nuvama Institutional Equities.

Open interest in the November futures of the Nifty 50 was largely flat at 9.34 million, suggesting that long bets were unwound while shorts were added. Number of open positions in the December contract jumped 36% to 4.4 million, as bearish positions may have been added, said analysts.

For the Nifty 50, the 24350 zone will act as strong resistance in the short term while its 21-Days exponential moving average of 24070 points will provide immediate support, said Hrishikesh Yedve, assistant vice president – technical and derivatives research at Asit C. Mehta Investment Intermediates, in a note. As long as the index persists below 24350 points, traders should focus on booking profits and wait for a fresh breakout, he said. 

Some short positions were also added in the futures of Adani Enterprises and Adani Ports and Special Economic Zone after foreign rating agencies, including Fitch Ratings and Moody's Ratings, gave a bearish outlook on some group companies' long-term ratings, amid the indictment against the Adani Group chairman and some senior officials in the US. The shares closed 4.7% and 3.3% lower, respectively, in the spot market.

--Nifty 50 Nov closed at 24205.00, down 68.50 points; 10.50-point premium to spot index

--Nifty 50 Dec closed at 24350.30, down 71.25 points; 155.80-point premium to spot index

--Nifty 50 Jan closed at 24514.30, down 54.00 points; 319.80-point premium to spot index

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

Edited by Akul Nishant Akhoury

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