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Informist, Monday, Jan. 20, 2025

By Anjana Therese Antony

MUMBAI – The improvement in its operating margin, deal wins, and better-than-expected earnings during the December quarter sparked long bets in the derivatives chain of Wipro, whose shares skyrocketed and closed as the second-largest gainer in the Nifty 50 Monday. Some analysts expressed optimism about the "impressive" margin growth, but also raised concerns about the stock's expensive valuation. 

Shares of the company closed 6.5% higher at INR 300.25 on the National Stock Exchange, which is INR 191.60 billion gain in market capitalisation. The support for the stock is seen at INR 295-280 in the near term and resistance at INR 315-320, a senior technical and derivatives analyst at a domestic broking firm said. The rise would be limited as its valuation is "not comfortable due to the recent run up". 

In the options chain of the stock, traders bought out-of-the-money call contracts close to the current level, while they sold deep out-of-the-money call options. They also sold deep out-of-the-money put contracts, indicating that the stock may not see a major fall before the expiry of these contracts on Jan. 30. Premiums on INR 305.00-317.50 call options rose 5-74%, while those on contracts above this level fell 30-45%. Also, premiums on INR 300-260 put options declined 79-92%. The highest addition of open interest was at INR 305 call and INR 300 put strikes. There were long additions in the futures segment of Wipro, where open interest rose more than 20% to 71.15 million. The January series mirrored the surge in the cash market and closed 7.6% higher at INR 301.65. 

Analysts had expected the Bengaluru-based major to be the laggard among large-cap information technology peers and had anticipated sequential decline in the growth of key earnings parameters. However, the company surprised with a sequential positive growth figures, which also beat the Street's views. India's fifth-largest IT company's consolidated net profit grew 4.5% on quarter to INR 33.54 billion, higher than analysts' average of estimates of INR 30.57 billion. Its consolidated revenue grew 0.1% to INR 223.19 billion, also above the estimate of INR 222.31 billion. 

Wipro's operating margin, calculated as earnings before interest and tax margin, rose to 17.5% from 16.8% from a quarter ago and was the highest level in three years. The large deal wins for the quarter were $961 million, up 6% on year in constant currency terms. However, its margin guidance of flat growth in margin for the March quarter was considered to be a negative. 

Gains in Wipro contributed to nearly 0.1% rise in the Nifty 50 which closed 0.6% higher at 23344.75 points. The near-term support for the 50-stock index is pegged at 23200-23000 points and resistance at 23550-23900 points. The index rose after two weeks of fall, losing 3% during that period. 

Premiums on 23350-23900 call options expiring Thursday rose 23-32% and those on 23350-23000 put contracts declined 41-58%. The highest open interest addition was at 24400-point call and 23000-point put strikes. The January series of the Nifty 50 futures also rose and closed at a premium to the spot level. However, traders exited some long positions in this series and open interest declined 0.4% to 14.22 million, but that in the February series rose 3.7% to 3.65 million. 

Analysts said they anticipate some volatility in the market ahead of Donald Trump taking charge as the 47th President of the US later on Monday. Investors will closely look for changes in policies under Trump's new regime. They will also track earnings outcomes in the coming days to identify the overall trend in financial growth of Indian companies. The recurring selling by foreign investors and the expensive valuation of the Indian market despite four months of decline will likely weigh on equities in the near term, a research analyst at a domestic broking firm said. 

--Nifty 50 Jan closed at 23393.00, up 125.80 points; 48.25-point premium to spot index

--Nifty 50 Feb closed at 23522.10, up 119.50 points; 177.35-point premium to spot index

--Nifty 50 Mar closed at 23670.05, up 118.60 points; 325.30-point premium to spot index

Kotak Mahindra Bank, Axis Bank, Zomato, Reliance Industries, HDFC Bank, Wipro, Bajaj Finance, ICICI Bank, Dixon Technologies India, State Bank of India, Infosys, Vodafone Idea, Tech Mahindra, Indian Hotels Co., Hindustan Aeronautics, One 97 Communications, and Indus Towers were the most actively traded underlying stocks Friday.  End

Edited by Deepshikha Bhardwaj

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