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Informist, Thursday, Nov. 28, 2024

By Apoorva Choubey

MUMBAI – More bearish positions compared to long bets were likely rolled over to the December futures of the Nifty 50 on the day of expiry of the November derivatives series, according to analysts. Market participants also sold call options of the benchmark across expiries, underscoring the bearish bias, which was a result of concerns over slower-than-expected interest rate cuts by the US Federal Reserve. 

Open interest in the December futures of the Nifty 50 jumped 70% to 11.9 million, suggesting that short bets were added. The spot index closed at 23914.15 points, down 360.75 points or 1.5%. 

Foreign investors likely remained net short on index futures after the expiry, analysts estimate. They were net short to the tune of $1.2 billion as of Wednesday, according to a daily report by Nuvama Institutional Equities. Other categories of participants, such as high net worth individuals and domestic institutional investors also remained bearish.

While foreign investors bought shares in the cash market recently, possibly due to MSCI index-related passive inflows, they remain net sellers for the month. The outlook for emerging market equities remains uncertain 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 for risky assets, fuelled by concern that US President-elect Donald Trump's trade tariffs could drive inflation higher.

"US inflation data, indicating robust consumer spending and persistent price pressures, has cast doubts on aggressive monetary easing," said Vikram Kasat, head of advisory at PL Capital, in a note. This not only rattled IT heavyweights like Infosys and HCL Technologies on expiry day but also dampened broader market sentiment, he said. Geopolitical tensions in Eastern Europe added another layer of uncertainty, further exacerbating market jitters, he added.

The Nifty 50 struggled near its resistance of 24350 points for the fourth day, and in the end, breached its crucial level of 21-days exponential moving average, said analysts. Investors are also cautious ahead of key data releases on Friday, including India's GDP growth numbers, China's manufacturing data, and minutes from the latest meeting of the US central bank expected later on Thursday, they said.

On an expiry-to-expiry basis, the Nifty 50 gained over 3%, marking a sharp recovery compared to previous weeks, but the index has formed another bearish candle on weekly charts, signalling that further downside pressure could emerge if it fails to reclaim key resistance levels, said Chandan Taparia, head of equity derivatives and technicals, wealth management at Motilal Oswal Financial Services. Overall, as per price structure, till the Nifty 50 holds below 24350 zones, gains could be sold for a downside target of 23600 levels, he said.

Options data reveals a bearish tone for the Nifty 50, with notable call-writing activity seen throughout the session, said Dhupesh Dhameja, derivatives analyst at SAMCO Securities. The 24300-strike price call option has garnered the highest open interest, while the 23500 strike put holds considerable open interest. The surge in call writing from 24000 to 24500 strike prices highlights the growing seller strength, while reduced put writing signals a stronger bearish sentiment, he added.

The index will find immediate support near 23800 points, followed by 23560 points, which is the 200-days exponential moving average level, said Hrishikesh Yedve, assistant vice president – technical and derivatives research at Asit C. Mehta Investment Intermediates. The index will continue to face strong resistance near 24350-24360 levels, he said.  

--Nifty 50 Dec closed at 24144.45, down 293.10 points; 230.30-point premium to spot index

--Nifty 50 Jan closed at 24302.00, down 301.50 points; 387.85-point premium to spot index

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

Edited by Akul Nishant Akhoury

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