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Informist, Wednesday, Jan. 22, 2025

By Alina Geogy

MUMBAI – HDFC Bank's largely in-line earnings for the December quarter encouraged traders to place bullish bets on the futures contracts of the stock on Wednesday. Positive readings for key earnings metrics, such as stable net interest margin, for the latest quarter are major positives for the bank, analysts said. The stock's valuation, which is seen as fairly attractive, may also be a key factor which could help it rise going forward, they said.

Some long positions were added and there was some short covering in the stock's futures contracts as well, Anshul Jain, head of research at Lakshmishree Investment and Securities, said. The bounce-back in the stock could also be because of it being in an oversold condition after a recent correction, he said. As of Tuesday's close, the stock was down nearly 10% from its one-month high, which it hit late last month.

The private lender posted a 2.2% on-year growth in net profit for the December quarter to INR 167.36 billion, broadly in line with the Street's estimate of INR 166.47 billion. The bank is progressing towards normalising its loan-to-deposit ratio further, the bank's management said in a post-earnings media call. Its net interest margin is fairly stable in comparison to other industry players, the management said.

Open interest in the January futures contract of HDFC Bank rose over 2% to 126.86 million. In the options chain, the maximum open interest addition on the call side was at the INR 1,700-INR 1,800 strike prices. These strike prices are 2-8% higher than the stock's closing price on Wednesday. Traders added long positions in call options contracts at the at-the-money and some out-of-the-money strike prices. On the put side, the highest open interest addition was at the INR 1,620 and INR 1,600 strike prices, which are 2-4% lower than the stock's current level. 

Jain is bullish on the stock and said it could have a strong upmove if it crosses INR 1,672, which is a resistance level for the near term. On the other hand, the stock could find support at INR 1,613, he said.

Shares of HDFC Bank closed 1.4% higher at INR 1,666.05 after recovering sharply from intraday lows on Wednesday. The stock was trading around 0.6% lower ahead of the bank's earnings announcement and rose sharply to an intraday high of INR 1,671.90, up 1.8%. The stock's intraday recovery also helped the benchmark indices bounce back sharply from the day's low. The stock's weightage, at nearly 13, was the highest amongst all other Nifty 50 constituents. The Nifty 50 closed at 23155.35 points, up 130.70 points or 0.6%, on Wednesday.

Meanwhile, traders covered short positions in the January futures contract of the Nifty 50 after its sharp recovery. The contract closed at 23198 points, at a premium of 42.65 points to the spot index. Open interest in this contract fell nearly 2% to 14.32 million, according to provisional data. Meanwhile, open interest in the February futures of the index rose nearly 14% to 4.94 million.

After the intraday correction, the Nifty 50 found support near 23000 points and bounced back sharply, Shrikant Chouhan, head of equity research at Kotak Securities, said in a note. For day traders, 23000 points would act as a crucial support zone for the index, he said. On the higher side, the market could bounce back to the range of 23250-23325 points, he said.

--Nifty 50 Jan closed at 23198.00, up 94.80 points; 42.65-point premium to spot index

--Nifty 50 Feb closed at 23330.00, up 94.10 points; 174.65-point premium to spot index

--Nifty 50 Mar closed at 23478.50, up 87.30 points; 323.15-point premium to spot index

HDFC Bank, Polycab India, Axis Bank, Infosys, Punjab National Bank, State Bank of India, Reliance Industries, ICICI Bank, Hindustan Aeronautics, Tata Motors, Zomato, Adani Enterprises, and Kotak Mahindra Bank were the most actively traded underlying stocks Wednesday.  End

Edited by Tanima Banerjee

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