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Informist, Monday, Jan. 6, 2025

By Alina Geogy

MUMBAI – Traders added short positions to most options contracts of the Nifty 50 expiring this week, hinting at a bearish sentiment in the near term. Worries about negative surprises on the earnings front, high valuations, and recent selling by overseas investors likely dented market sentiment.

The likelihood of weaker-than-expected earnings for the December quarter increased after some companies, including banks, released disappointing provisional business updates for the quarter. Some banks posted lower-than-expected credit growth for the December quarter with advances of the largest private bank, HDFC Bank, growing only 3%. Among others, Dabur India said its consolidated sales for Oct-Dec would grow in low-single digits, lower than earlier expected. 

Some analysts said news reports about cases of Human Metapneumovirus in some states may lead to panic in the market. However, analysts have downplayed the risk due to the virus for now. 

Traders added short positions in call options Monday, except for some deep out-of-the-money strike prices. For options contracts expiring this week, the highest addition in open interest on the call side was at the 24000-strike price, while on the put side it was at 23300 points. The maximum open interest concentration was at the 25000-strike price on the call side, and at 21850 points on the put side.

There was excessive shorting in the derivatives segment Monday, and this could continue for a few more days until short covering on expiry day, Anshul Jain, head of research at Lakshmishree Investment and Securities, said. The Nifty 50 is expected to find major support at 23500 points and resistance at 23800 points, he said. There was strong one-sided call writing, he said.

Foreign institutional investors were short on 230,000 index futures contracts, and 554,000 contracts in both futures and options, as of Friday, Jain said. FIIs had net sold shares worth over INR 43 billion in the domestic market Friday. From this perspective, these contracts are extremely oversold, he said. 

The Nifty 50 extended its decline for the second consecutive session and closed at 23616.05 points, down 388.70 points or 1.6%. The index fell as much as 1.9% to an intraday low of 23551.90 points, after opening slightly higher. Of all Nifty 50-constituents, 46 stocks ended lower. Stocks in the broader market also fell along with the benchmark indices. Nearly 84% of all stocks traded on the NSE ended with losses Monday.

Traders added short positions in the January futures contract of the Nifty 50. The contract closed down 1.5% at 23730 points, which is at a premium of 113.95 points to the spot index. Open interest in the contract rose 0.7% to 12.70 million, according to provisional data. Volume in the January futures contract was the highest since Dec. 13, or in other words, the highest in over three weeks. Traders also placed short bets in the March futures contract, but unwound long positions in the February futures contract.

--Nifty 50 Jan closed at 23730.00, down 362.40 points

--Nifty 50 Feb closed at 23865.00, down 369.15 points; 248.95-point premium to spot index

--Nifty 50 Mar closed at 24013.40, down 371.20 points; 397.35-point premium to spot index

HDFC Bank, Reliance Industries, Bajaj Finance, Infosys, Tata Motors, ICICI Bank, State Bank of India, Kotak Mahindra Bank, ITC, Jubilant FoodWorks, Axis Bank, and Bank of Boroda were the most actively traded underlying.  End

Edited by Deepshikha Bhardwaj

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