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Informist, Monday, Dec. 9, 2024

By Apoorva Choubey

MUMBAI – Bearish positioning was seen in most fast moving consumer goods companies' December futures and options, as the growth outlook for consumer-facing sectors in India looked bleak amid slowing demand and high inflation. Traders added short positions to the December futures of Godrej Consumer, Dabur India, ITC, Colgate Palmolive India, Nestle India, Marico, Hindustan Unilever, Tata Consumer Products, and Britannia Industries, leading to a 2-24% rise in open interest.

These stocks closed 1-9% lower in the spot market. Godrej Consumer Products recently said it expects mid-single-digit sales growth and only flattish underlying volume growth in Oct-Dec as the soaps and home insecticides segments are not expected to do well.

The inflationary environment will keep margins of consumer staples under pressure, at a time when unusual weather patterns such as a delayed winter in North India and cyclones are also weighing on business, according to analysts. Thus, the hopes of equity investors that FMCG companies may witness a recovery in earnings growth during Oct-Dec have been dashed, they said.

Traders sold all options of most of these stocks, while buying puts, suggesting that the weakness in shares of these consumer-driven companies may sustain in the near term. The bearishness was aggressive in Tata Consumer, HUL, Nestle and Godrej Consumer in particular. 

This bearish sentiment added to the overall caution in the market. Investors were also risk averse ahead of upcoming key events, such as inflation data in key economies and the Federal Reserve's policy review next week, as well as due to rising geopolitical tensions. Traders sold the December futures and call options of the Nifty 50. Put options of the index were bought, reflecting the bearish bias for the day. 

Open interest in the December futures of the Nifty 50 rose 1% to 11.5 million and the contract provisionally ended at a premium of 84.7 points to the spot index. The Nifty 50 closed at 24619, down 58.80 points or 0.2%. 

The long-short ratio in index futures positioning for foreign investors has increased significantly from 0.49 to 0.81 last week, indicating a strong bullish sentiment and the addition of long positions, Axis Securities said in a weekly report. The current Put-Call Ratio or PCR stands at 1.03, above the neutral threshold of 1, Axis Securities said. This suggests a higher number of put options positioning relative to call options in the market over the past week, which reflects a moderately positive bias for the Nifty 50 this week, it said.

Traders sold out-of-the-money call options of the Nifty 50, indicating that gains are seen limited in the near term. The 24700, 24800, and 25000 strike prices were the most actively written options. On the put side, out-of-the-money strikes were bought. The level of 24330 points, which is also the 100-Days Exponential Moving Average, may act as a support for the index, while resistance is seen at 24800 points next, analysts said.

--Nifty 50 Dec closed at 24698.60, down 84.65 points; 79.60-point premium to spot index

--Nifty 50 Jan closed at 24873.00, down 78.10 points; 254.00-point premium to spot index

--Nifty 50 Feb closed at 25019.40, down 70.20 points; 400.40-point premium to spot index

HDFC Bank, Reliance Industries, Tata Motors, ICICI Bank, Godrej Consumer Products, Larsen & Toubro, State Bank of India, BSE, Hindustan Unilever, Tata Steel, Laurus Labs, Infosys, Axis Bank, Dixon Technologies India and DLF were the most actively traded contracts.  End

Edited by Akul Nishant Akhoury

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