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Informist, Thursday, Dec. 12, 2024

By Apoorva Choubey

MUMBAI – Indian equities are likely to be lacklustre in the near-term, as foreign investors are adding short bets in index futures, even as domestic institutions are paring their bearish positions, according to derivatives analysts. While geopolitical tensions, trade tariff-related uncertainties, and slowing world economy have made the short-term outlook for equities bleak, a section of market participants is still bullish on the medium-term prospects of Indian stocks, due to strong domestic inflows as well as the expectation of a revival in public spending and private capital expenditure, they said.

Even as foreign institutions are less bearish on index futures than they were at the start of the month, they still have sizeable short positions, analysts noted. FIIs were net short on index futures to the tune of $380 million on Wednesday, higher than $300 million on Monday, according to a report by Nuvama Institutional Equities. At the start of December, they were net short to the tune of $930 million, the report said.

On the other hand, domestic institutions have reduced net short bets in the last two weeks, and now their net bearish bets in index futures are worth $60 million, compared to over $250 million earlier. The long-short ratio has improved greatly in recent sessions, but still signals a weak outlook for the Nifty 50, said the head of derivatives at a city-based brokerage house.

Open interest in the December futures of the Nifty 50 rose nearly 1% to 11.2 million Thursday. The Nifty 50 closed the day at 24548.70, down 93.10 points or 0.4%. Most global equities have been lacklustre this week, as investors are waiting for key events such as the US Federal Reserve's policy review and a slew of economic data releases across several countries.

On the options front, writers continued to be active in out-of-the-money call options of the Nifty 50 monthly series. Maximum open interest is at the 26000 strike price call option of the Nifty 50, followed by 25000 strike price, while the highest number of open positions among put options is at the 23500 and 24000 strike prices, noted Chandan Taparia, head of equity derivatives and technicals, wealth management, Motilal Oswal Financial Services.

Call writing was seen at 24600 and 25000 strike prices, while put writing is seen at 23900 and 24500 strikes, he said. Option data suggests a broad range of 24000 to 25000 points and an immediate range of 24400 to 24800 levels for the index, he said.

Axis Securities has advised options traders to use a "bull-call spread" strategy for the next week. This type of strategy is used when the trader expects a moderate rise in the price of an underlying asset.

"Traders could initiate this spread strategy to make modest returns with limited risk and reward," the brokerage said. It recommended buying one lot of 24600 strike price call option and simultaneously selling one lot of the 24900 strike price call option.

--Nifty 50 Dec closed at 24647.00, down 87.90 points; 98.30-point premium to spot index

--Nifty 50 Jan closed at 24829.30, down 80.45 points; 280.60-point premium to spot index

--Nifty 50 Feb closed at 24980.00, down 70.70 points; 431.30-point premium to spot index

Reliance Industries, HDFC Bank, National Aluminium Co, Bharti Airtel, ICICI Bank, Infosys, Coforge, Adani Enterprises, State Bank of India, Tata Motors, Vedanta, Hindustan Unilever, Tata Steel and Adani Ports and Special Economic Zone were the most actively traded contracts.  End

Edited by Ashish Shirke

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