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Informist, Friday, Jan. 24, 2025

By Anjana Therese Antony

MUMBAI – More pain likely awaits Cyient, which saw aggressive short bets in its derivatives chain Friday, on multiple factors, including the chief executive officer's resignation, a decline in the December quarter bottom line, reduction in revenue guidance for the current financial year, and some weak near-term outlook. Premiums on deep out-of-the-money call strikes expiring next week fell almost 100%, while those on put contracts more than doubled, hinting at the near-term downside for the stock. 

The company lost over INR 45 billion in market capitalisation as the stock nosedived to a 20-month low. Its shares closed 23.4% lower at INR 1,344.90 on the National Stock Exchange, marking the sharpest decline by a Nifty 500 constituent on Friday. Near-term support for the stock is pegged at INR 1,320-INR 1,300 and resistance at INR 1,400-INR 1,440, a technical and derivatives analyst at a domestic broking firm said, adding that a sharp fall is unlikely for the stock due to the major correction Friday. 

The volume of the stock traded skyrocketed to 14.81 million, which is 20 times the number of shares that changed hands in the previous session. This was also sharply higher than the one-month daily average volume of 386,000 shares. Premiums on INR 1,500-INR 2,200 call options declined 75-97%. They also added bearish bets in the futures segment, with open interest in the January series rising nearly 106% to 2.86 million. The contract closed 22.8% lower at INR 1,357.85. 

The resignation of Karthikeyan Natarajan, who was associated with the company for five years, as the CEO came as a "surprise", analysts said, raising concerns about the company's outlook. Cyient reduced the FY25 revenue growth guidance in constant currency terms to (-)2.7% from flat earlier and also trimmed its operating margin guidance to 13.5% from 16% earlier. This came amid rising expectations of better earnings performance of Indian information technology companies in the March quarter, likely higher discretionary spending, and more interest rate cuts in the US. 

For the December quarter, the company's net profit was down 32% sequentially at INR 1.22 billion, while revenue rose 4% to INR 19.26 billion. This was among the worst growth any company has reported in the information technology space so far. Nuvama Institutional Equities reduced the target price by INR 40 to INR 1,660, while maintaining its 'hold' rating. "Negative surprise primarily came from the sustainability vertical, as some of the existing deals are getting over while new deals are getting delayed in ramp-up," the broking firm said. 

The overall Indian equity market also closed in the red, down for the third consecutive week amid selling pressure from foreign investors and lacklustre corporate earnings. The Nifty 50 closed 0.5% lower at 23092.20 points and the Sensex ended 0.4% lower at 76190.46 points. Support for the 50-stock index is seen at 22800-22700 points and resistance at 23500-23550 points, the derivatives analyst said. Analysts expect Indian equities to see muted gains next week on some caution ahead of the Union Budget. 

--Nifty 50 Jan closed at 23114.00, down 149.70 points; 21.80-point premium to spot index

--Nifty 50 Feb closed at 23241.05, down 153.25 points; 148.85-point premium to spot index

--Nifty 50 Mar closed at 23400.00, down 145.30 points; 307.80-point premium to spot index

HDFC Bank, Reliance Industries, ICICI Bank, Mphasis, Kotak Mahindra Bank, Axis Bank, AU Small Finance Bank, Laurus Labs, One 97 Communications, State Bank of India, Bajaj Finance, Dr. Reddy's Laboratories, Vedanta, Cyient, and Infosys were the most actively traded underlying stocks.  End

Edited by Saji George Titus

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