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Informist, Wednesday, Nov. 27, 2024

By Apoorva Choubey

MUMBAI – Market participants covered short bets in the futures of Adani Ports and Special Economic Zone, and Adani Enterprises, while buying their call options. Adani group stocks saw sharp gains on Wednesday after Adani Green Energy issued a clarification that owner Gautam Adani and his associates have not been charged under the US Foreign Corrupt Practices Act. 

In the cash market, shares of Adani Ports and Special Economic Zone jumped 6% to end at INR 1,199.95, while those of Adani Enterprises surged 11.5% to close at INR 2,397.80. The sentiment for Adani group stocks also got a boost as Adani Green said the directors have been charged on counts of securities and wire fraud, which generally result in a penalty.  

Shares of Adani Group companies had crashed Thursday after news reports said Chairperson Gautam Adani was being indicted by a district court in the US over an alleged multi-billion dollar bribery and fraud scheme involving his solar projects in India. The US prosecutors reportedly said Adani and seven others, including his nephew Sagar Adani, agreed to pay about $265 million in bribes to Indian government officials to receive contracts expected to yield $2 billion of profit over 20 years. 

After the clarification, short bets were covered in Adani Enterprises, as evident from the fact that open interest in the November futures of the stock fell 14.5% to 5 million. In the November futures of Adani Ports and Special Economic Zone too, bearish positions were squared off, as reflected in the 2% fall in open interest to 11.1 million.

Call options of Adani Enterprises were bought across strikes, with premiums surging, suggesting that traders covered short bets in some strikes while adding long bets in others. The INR 2,500 strike price call option now holds the maximum open interest among out-of-the-money strikes and saw aggressive buying today. 

Market participants bought most call options of Adani Ports as well, with put options being sold. The INR 1,300 strike price has the highest open interest among out-of-the-money call options and was the most actively bought. 

The sentiment boost for Adani group stocks pushed the Nifty 50 marginally higher today, but is unlikely to have made any impact on the bearish bias of the overall derivatives market positioning, analysts said. Foreign investors remain net short on index futures to the tune of $1.23 billion as on Tuesday, higher than their short bets seen at the start of the November series, according to a report by Nuvama Institutional Equities. Other categories of participants, such as high networth individuals and domestic institutional investors have also increased their bearish positions compared to a month ago. 

There has been significant selling by foreign investors in the cash market too, over the past 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 US President-elect Donald Trump's aggressive trade tariffs 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.

Thus, the Nifty 50's out-of-the-money call options continue to be sold, which signals that market participants are not expecting a recovery in the index anytime soon. In the current month series, the 24500 strike price call option holds the maximum open interest and was among the most actively sold today. The Nifty 50 closed at 24274.90 points, up 80.40 points or 0.3%. 

Key activity is concentrated in the 24300–24500 call option range and the 24200–24000 put range, highlighting immediate resistance at 24500 points for the Nifty 50 and firm support at 24000 points, said Dhupesh Dhameja, derivatives analyst at SAMCO Securities. "This tug-of-war between buyers and sellers emphasises the likelihood of a breakout dictating the next directional move," he said. The put-call ratio (PCR) declined to 0.93 from 1.03, reflecting subdued sentiment as the market remains range-bound, he added. 

Open interest in the November futures of the Nifty 50 jumped nearly 11% to 8.85 million, suggesting that long bets were added. The number of open positions in the December contract jumped 65% to 7.05 million, as bullish positions may have been added, said analysts. 

--Nifty 50 Nov closed at 24309.00, up 91.90 points; 34.10-point premium to spot index

--Nifty 50 Dec closed at 24445.55, up 88.65 points; 170.65-point premium to spot index

--Nifty 50 Jan closed at 24611.00, up 90.65 points; 336.10-point premium to spot index

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

Edited by Deepshikha Bhardwaj

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