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Informist, Friday, Dec. 6, 2024

By Apoorva Choubey

MUMBAI – The Nifty 50 is likely to witness consolidation next week, going by the widespread writing seen in the call and put options of the index, across most strikes. The caution came after the Reserve Bank of India reduced its projections for the country's GDP growth and raised the inflation forecast, at a time when a cut in the cash reserve ratio for banks was already factored in share prices. 

Traders sold most out-of-the-money call options of the index, with the 25000 strike price being the most actively traded and with the maximum open interest in the monthly series. Other strikes such as 25200 and 25500 were also actively written, indicating that gains are seen limited in the near-term. 

Writers were active in the put options of the Nifty 50 with as much fervour as call options. The 24500 and 24000 strike price put options were the most actively sold, and hold among the highest open positions, indicating that the support for the Nifty 50 is placed at these levels.

The benchmark snapped a five-day gaining streak to close at 24677.80 points, down 30.60 points or 0.1%. Option data suggests a broader trading range from 24000 points to 25500 zones along with an immediate range of 24500-24850 levels, said Chandan Taparia, head of equity derivatives and technical, wealth management, Motilal Oswal Financial Services.

The sentiment took a hit after the RBI lowered its GDP growth forecast for 2024-25 (Apr-Mar) by 60 basis points to 6.6% and raised the headline inflation forecast for the year by 30 bps to 4.8%. 

The Indian central bank's rate-setting committee voted by four votes to two to leave the policy repo rate unchanged at 6.50%. The committee also retained the 'neutral' policy stance, having adopted it in October from 'withdrawal of accommodation'. The RBI lowered the cash reserve ratio by 50 bps to 4.00% of net, demand and time liabilities in two equal tranches.

Some options writing was also seen ahead of key economic data releases and the policy review of the US Federal Reserve in mid-December, said a derivatives analyst at a local brokerage. US Federal Reserve Chair Jerome Powell Wednesday said the economy is in "remarkably good shape", which fuelled the market's expectations of a 25-basis-point cut at the central bank's meeting later this month. The odds of a 25-bps cut were 74%, higher than 66.5% a week ago, according to the CME FedWatch Tool.

Market participants are closely watching the release of Eurozone GDP, US unemployment figures and non-farm payrolls data, which are expected to provide key signals on economic momentum, said analysts. Other economic data releases, including GDP numbers from the US, Japan, and UK, along with China's CPI, and India's CPI, will also be monitored.

Open interest in the December futures of the Nifty 50 rose nearly 3% to 11.5 million, on a provisional basis. The spot index has gained 2.3% so far this month, largely backed by covering of short positions by foreign institutional investors in index futures as well as their cash buys. 

"The recent developments have certainly improved market sentiment, as key indices have shown a strong resurgence and have gained significant traction," Osho Krishnan, senior technical and derivatives analyst at Angel One. However, given the current movements, it is advisable not to become overly aggressive, he said. Instead, waiting for dips could be a more prudent strategy at this time, he added. 

Among stock futures, automobile counters saw bullish bets but banks and information technology companies, which had gained earlier in the week, witnessed bearish bias on Friday. 

--Nifty 50 Dec closed at 24775.00, up 10.65 points; 97.20-point premium to spot index

--Nifty 50 Jan closed at 24949.00, up 19.25 points; 271.20-point premium to spot index

--Nifty 50 Feb closed at 25090.00, up 28.55 points; 412.20-point premium to spot index

HDFC Bank, ICICI Bank, Tata Motors, Vedanta, State Bank of India, Axis Bank, Reliance Industries, Samvardhana Motherson International, Multi Commodity Exchange of India, Punjab National Bank, BSE, Bajaj Finance, Canara Bank and Trent were the most actively traded contracts.  End

Edited by Saji George Titus

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