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Informist, Friday, Jan. 31, 2025

By Anjana Therese Antony

MUMBAI – Though the December quarter did not paint a bright picture of Tata Consumer Products, the coming months are likely to be better, as the company expects the pressure on its margins to ease going forward. The optimism was mirrored in the stock price and the derivatives chain, where investors placed upside bets. Premiums on deep out-of-the-money call options were in the green, while puts were in red, with both sides seeing additions in open interest. 

In the cash market, the stock hit a three-month high and closed 6% higher at INR 1,024.65 on the National Stock Exchange, the top gainer in the Nifty 50. Premiums on INR 1,050-INR 1,140 call options expiring Feb. 27 increased 66-110% and those INR 1,020-INR 800 declined 57-82%. The maximum open interest addition was at INR 1,050 call and INR 1,000 put options. On the futures side, however, traders exited some long positions from the February series, but added long bets to the March futures. 

During the reporting quarter, Tata Consumer and other fast-moving consumer goods peers felt the heat of a surge in tea prices. This led to a faster rise in expenses--which rose to a 15-quarter high--than its revenue and flat growth in the bottom line. However, the company sounded optimistic about the coming months. It is hopeful that the pressure on its margins on account of high tea prices will ease over the next couple of quarters. The retailer posted a consolidated net profit of INR 2.79 billion on revenues of INR 44.44 billion. 

"...gross margin pressures led by spiralling tea and coffee costs were far more intense than expected leading to 11% miss on our EBITDA forecasts," Nirmal Bang Institutional Equities said in its post-earnings report. The company's gross margin fell 270 basis points on year to 41.1%, lower than the broking firm's estimate of 43.6%.

Similar to the bullish positions in the FMCG company, traders are betting on a near-term bull run for the domestic stock market, which has been strapped with expensive valuations and selling pressure from foreign investors, further tightened by the disappointing earnings season so far. However, investors are betting on the government's capital expenditure activities to gain traction in the coming months. Returns from the market are not expected to be sharply higher than the previous year, analysts said. Benchmark indices closed higher for the fourth consecutive session, the highest winning streak since early December. The Nifty 50 and Sensex closed around 1% higher each at 23508.40 points and 77500.57 points, respectively. 

--Nifty 50 Feb closed at 23639.00, up 220.70 points; 130.60-point premium to spot index
--Nifty 50 Mar closed at 23782.00, up 213.70 points; 273.60-point premium to spot index
--Nifty 50 Apr closed at 23912.90, up 270.05 points; 404.50-point premium to spot index

UPL, Jindal Steel & Power, Larsen & Toubro, Tata Motors, HDFC Bank, Bharat Electronics, Bank of Baroda, Reliance Industries, Bajaj Finance, Sun Pharamceutical Industries, Punjab National Bank, Bharti Airtel, and Cholamandalam Investment and Finance Co. were the most actively traded underlying contracts.  End

Edited by Avishek Dutta

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