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Informist, Saturday, Feb. 1, 2025

By Anjana Therese Antony

MUMBAI – The government's income tax bonanza made traders place aggressive long bets in the derivatives chain of consumer companies, including fast-moving consumer goods and retail companies, whose stock prices surged Saturday. Traders seemed confident about the upside in these stocks as premiums on call options more than doubled, while those on put contracts halved, hinting at optimism for the near term. 

Providing a major sigh of relief to investors, Finance Minister Nirmala Sitharaman announced that no tax would be applicable on income of up to INR 1.2 million, compared to INR 700,000 earlier. This comes amid weakness in urban demand and only a gradual recovery in rural consumption, which hit the financial growth of the FMCG sector. Major companies in the sector failed to post good earnings for the December quarter, but sounded optimistic about demand trends in the coming quarters. The government's boost will lead to a shift in focus towards consumption-heavy companies from those dependent on the government's capital expenditure such as defence, cement, and some construction players, heads of research at two broking firms said. 

Among major gainers on Budget day were Godrej Consumer Products, Trent, and Avenue Supermarts, which closed 6-10% higher. Aggressive long positions were also added to their February futures series, expiring Feb. 27. The Indian stock market was open on Saturday on account of the Union Budget. 

In the options chain of Avenue Supermarts, which closed 9.8% higher at INR 4,023.75, premiums on INR 4,150-INR 4,550 call contracts rose over a whopping 300%, while those on INR 4,000-INR 3,700 put strikes fell more than 60%. The case was similar with Trent and Godrej Consumer, whose premiums on call options rose more than 100-200%, whereas the put side saw an over 50% fall. 

However, this cheer was not mirrored in the overall Indian equity market as expectations of lower capital expenditure in the current financial year negated the impact of the tax relief. Benchmark indices, which recovered from the new tax announcements, fell again and closed largely unchanged from the previous day's levels after the downward revision of the 2024-25 (Apr-Mar) capex to INR 10.18 trillion from the Budget estimate of INR 11.11 billion. 

Also, the government indicated only modest growth in capex in FY26, projecting spending of INR 11.21 trillion, up 10.1% from the revised estimate for FY25. This hit market participants hard, as they were betting on the government's spending to gain pace from March or April. The Nifty 50 closed over 26 points lower at 23482.15 points, while the Sensex hardly ended 6 points higher at 77505.96 points. 

--Nifty 50 Feb closed at 23560.40, down 59.80 points; 78.25-point premium to spot index
--Nifty 50 Mar closed at 23697.60, down 67.55 points; 215.45-point premium to spot index
--Nifty 50 Apr closed at 23850.90, down 48.50 points; 368.75-point premium to spot index

Bharat Electronics, Hindustan Aeronautics, Larsen & TOubro, ITC, Maruti Suzuki India, Reliance Industries, Bajaj Finance, Titan Co., HDFC Bank, Trent, Hindustan Unilever, State Bank of India, Dixon Technologies India, HDFC Life Insurance Co., IndusInd Bank, ICICI Bank, and Tata Motors were the most actively traded underlying contracts.  End

Edited by Avishek Dutta

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