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Informist, Wednesday, Dec. 4, 2024

By Apoorva Choubey

MUMBAI – Several public-sector banks witnessed the addition of bullish positions in their December futures and options, as the equity market is hopeful of liquidity-boosting measures by the Reserve Bank of India, including a cut in cash reserve ratio for banks. The central bank's Monetary Policy Committee will declare the outcome of the policy review on Friday.

Open interest in the December futures of Union Bank of India, Indian Bank, and Bank of India jumped 27-143%, while that in the current-month contract of Canara Bank, State Bank of India, Bank of Baroda, and Punjab National Bank rose 1-2%. Shares of these lenders ended 1-4% higher in the cash market.

The Nifty PSU Bank index gained 2.3% while the Nifty Bank rose 1%. Bullish bets were also added in the banking benchmark, as gains in the sector are seen sustaining this week, experts said.

Market participants bought call options of banks, while selling puts, also reinforcing the bullish bias seen in the banking index, analysts said. Aside from the expectation of a CRR cut, the Banking Laws (Amendment) Bill, 2024, which was passed in the Lok Sabha on Tuesday, also aided the strength in banking stocks, as the bill is aimed at introducing significant changes for improving governance in the sector, according to Siddhartha Khemka, head of research, wealth management, Motilal Oswal Financial Services.

The bullishness for the banking sector spilled over to the Nifty 50 as well. Traders net bought call options of the Nifty 50 and sold put options, across weekly and monthly expiries. 

The Nifty 50 ended a choppy session at 24467.45, up 10.30 points. The index gained for the fourth consecutive day but faced resistance near its 50-day moving average of 24598 points.

The 24500, 24700, 24800, and 25000 strike price call options were the most actively bought, but with a single-digit jump in premiums. On the put side, out-of-the-money strikes were sold with as much fervour as call options were bought. The 24000 strike price put option was among the most actively sold and now holds the maximum open interest among out-of-the money strikes. 

Foreign investors have reduced their net short positions in index futures, ahead of the outcome of the RBI's monetary policy review on Friday. Participants could be exiting positions not only ahead of the RBI policy, but also before the US jobs data, speech of US Federal Reserve Chair Jerome Powell, and the US central bank's policy review next week, experts said.

While stock-specific buying by domestic investors has helped the Nifty 50 inch higher in recent days, investors remain worried about slowing growth, rising dollar and global uncertainties. India VIX, also known as "fear gauge" in market parlance, rose 0.5% to 14.4500. Open interest in the December futures of the Nifty 50 was flat at 11.6 million.

"We believe that the short-term market trend is still positive, and a strategy of buying on dips and selling on rallies would be ideal for day traders," Shrikant Chouhan, head of equity research at Kotak Securities, said in a note. For the Nifty 50, the 24350-24250 level will act as a key support zone, while 24550 points and 24625 points could serve as crucial resistance levels, he said. However, a breach below 24250 would render the uptrend vulnerable, he added.

--Nifty 50 Dec closed at 24563.00, up 16.00 points; 95.55-point premium to spot index

--Nifty 50 Jan closed at 24725.00, up 17.90 points; 257.55-point premium to spot index

--Nifty 50 Feb closed at 24868.00, up 15.75 points; 400.55-point premium to spot index

HDFC Bank, Reliance Industries, Dixon Technologies (India), ICICI Bank, Axis Bank, State Bank of India, Bharat Electronics, Hindustan Aeronautics, Bharti Airtel, Tata Motors, Tata Consultancy Services, Infosys and ITC were the most actively traded contracts.  End

Edited by Ashish Shirke

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