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Informist, Thursday, Jan. 23, 2025

By Anjana Therese Antony

MUMBAI – A healthy earnings growth in a seasonally-weak December quarter and a positive outlook from analysts on the company led to aggressive long bets in Coforge's derivatives segment Thursday. Premiums on deep out-of-the-money call options more than doubled, while those on put contracts tumbled, hinting at the potential upside for the stock in the near term. The optimism was evident in the stock price, which skyrocketed and closed nearly 12% higher at INR 9,196.45 on the National Stock Exchange. 

In the options chain of Coforge, premiums on INR 9,100-INR 10,000 call contracts expiring Jan. 30 surged 93-368% and those on INR 9,000-8,500 put options declined 87-94%. The maximum open interest addition is at INR 9,300 call and INR 8,500 put strikes. The futures contract of the company also surged and closed 11% higher at INR 9,168.10. Long positions were aggressively added in the January series, with open interest rising nearly 11% to 2.51 million. 

The pace of growth in key earnings parameters of the company was much higher than some of the large-cap information technology giants such as Tata Consultancy Services, Infosys, and Wipro. Coforge posted a near 7% sequential growth in consolidated net profit to INR 2.16 billion, missing the Street's estimates by a slight margin. Its top line of INR 33.18 billion for the December quarter also came higher than analysts' estimate of INR 32.38 billion.

The management said there will be a definite, yet gradual improvement in the demand scenario. Indian IT companies had earlier felt the heat of high interest rates in the US, weak demand, and a sharp cut in discretionary spending. However, management comments of various IT players indicate that there are signs of recovery in these trends. 

Robust growth of Coforge had a ripple effect on other IT stocks, resulting in overall gains in the equity market during the day. Benchmark indices Nifty 50 and Sensex closed 0.2% higher each at 23205.35 points and 76520.38 points, respectively. The near-term support for the 50-stock index is pegged at 23100-23000 points and resistance at 23500-23800 points, according to a technical and derivatives analyst at a bank-sponsored broking firm. 

Traders do not expect the Nifty 50 to cross the psychologically important level of 24000 points before the monthly expiry of the derivatives contracts next week. However, some bullish bets are placed at 23800-23900 levels. Premiums on 23200-23700 call strikes rose 10-14%, while those on 23200-22000 put options declined 10-19%. The maximum open interest addition was at 26500-point call and 21500-point put contracts. 

The market closed in the green for two consecutive sessions, but analysts do not see any major relief for investors, who have been losing money for about four months now. The market has fallen around 10% since October due to selling pressure among foreign investors, lacklustre earnings, depreciation of the rupee, shift to other markets such as the US and China, and uncertainty around policies under the US President Donald Trump. FIIs have been increasing their short positions in index futures to 80%, similar to what was seen during the General Elections in India last year. 

--Nifty 50 Jan closed at 23267.00, up 68.05 points; 61.65-point premium to spot index

--Nifty 50 Feb closed at 23390.00, up 58.70 points; 184.65-point premium to spot index

--Nifty 50 Mar closed at 23547.60, up 67.80 points; 342.25-point premium to spot index

HDFC Bank, UltraTech Cement, Coforge, State Bank of India, Reliance Industries, Axis Bank, Persistent Systems, ICICI Bank, Polycab India, Bajaj Finance, JSW Steel, Hindustan Unilever, Wipro, Infosys, Tata Motors, and Kotak Mahindra Bank were the most actively traded underlying stocks Wednesday.  End

Edited by Akul Nishant Akhoury

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