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Informist, Tuesday, Feb. 4, 2025

By Anjana Therese Antony

MUMBAI – A day after traders placed bearish bets on the Nifty 50, they added aggressive long positions on Tuesday after the US paused tariffs on Canada and Mexico. Analysts are expecting volatility in the coming days, especially due to the uncertainty about further policies from the US and fears of retaliatory measures from its key trading partners in the days to come. Premiums on call options doubled and puts halved amid the surge in the market. 

"We are already experiencing that (volatility) with the flip-flops in policies taken by the US...Structurally, we want to believe that there could be a case for potential tariff arbitrage which could work in India's favour," said Pankaj Pandey, head of research at ICICI Securities. For the first time in more than a month, foreign investors turned net buyers in the domestic market Tuesday, while domestic players were net sellers. Domestic equities have seen poor returns so far this year, compared to most other global economies, including the US and most Asian and European markets. 

Premiums on call options of the Nifty 50 at 23800-24200 strikes expiring Thursday rose 187-322% and those on 23700-23100 put contracts declined 74-84%. The highest addition of open interest was at 23800-point call and 23500-point put options. The shift in focus to 23500 put strike from 23300 in the previous day and from the significantly lower 22500 on Saturday hints that a sharp fall is unlikely in the near term. 

The market--which fell Monday after Trump announced tariffs on Canada, Mexico, and China--recovered all the losses Tuesday after the US president paused the imposition on Canada and Mexico by a month. In response to the levies, Canada and China charged tariffs on some imports from the US. The Nifty 50 closed 1.6% higher at 23739.25 points and the Sensex ended 1.8% higher at 78583.81 points. The near-term support for the 50-stock index is seen at 23500-23450 points and resistance is pegged at 24000 points, a key hurdle now watched by the market. The last time the index closed above 24000 points was on Jan. 3. 

India has not been added to the list of 'tariff makers', who, according to the US president, have been "hurting" the world's largest economy. However, there are worries that the US may soon impose tariffs on India, in case of which the market is expected to fall significantly. 

--Nifty 50 Feb closed at 23791.00, up 348.25 points; 51.75-point premium to spot index
--Nifty 50 Mar closed at 23932.00, up 350.75 points; 192.75-point premium to spot index
--Nifty 50 Apr closed at 24074.55, up 353.45 points; 335.30-point premium to spot index

HDFC Bank, Reliance Industries, Asian Paints, ICICI Bank, State Bank of India, Trent, Axis Bank, Larsen & Toubro, Infosys, Kotak Mahindra Bank, IndusInd Bank, Tata Motors, Hindustan Aeronautics, Divi's Laboratories, Bharat Electronics, Mahindra & Mahindra, ITC, and Titan Co. were the most actively traded underlying contracts.  End

Edited by Akul Nishant Akhoury

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