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Informist, Thursday, Feb. 6, 2025

By Alina Geogy

MUMBAI – Disappointing quarterly earnings by Tata group-owned Trent pushed traders to place bearish bets on the derivatives segment of the stock on Thursday. Aggressive short bets were added to the options and futures segments. Premiums more than halved on most call contracts and doubled for most deep out-of-the-money put options. 

Trent reported a 37% on-year growth in both net profit and sales to INR 4.69 billion in the December quarter and INR 45.35 billion, respectively. However, both revenue and profit fell short of analysts' estimates. Following the results, the stock extended its fall for the fourth consecutive session and closed over 8% lower at a six-month low of INR 5,277.10. The stock was the worst-hit Nifty 50 constituent Thursday.

Trent's announcement that it will optimise the store portfolio in the current financial year, besides focussing on store expansion and like-for-like growth, has also raised worries. As a result, the company is expected to incur large capital expenditure, an analyst tracking the sector said, though he did not specify the approximate amount. This programme involves upgrading or consolidating smaller footprint stores with newer stores in more attractive micro markets, the company said Thursday. 

Another factor that pulled the stock price lower was the expensive valuation. It has risen nearly 74% in 52 weeks, but fell 25% in 30 days. The recent weakness in the stock came after Reliance Retail re-launched Chinese fashion retail brand Shein recently. Foreign brokerage firm Goldman Sachs Wednesday said that the weakness seen in the stock is an opportunity to add positions, as per media reports. Trent's retail brand, Zudio, still has the potential to gain market share with a low competitive risk and the scale up of any new competitor is likely to be gradual and not disruptive, Goldman Sachs said. 

The maximum change in open interest in options contracts of Trent was at the INR 6,000 and INR 5,800 strike prices on the call side. These levels are 9-14% higher than the stock's closing price. On other hand, the INR 5,000 put strike has the highest open interest addition and this level is around 5% lower than the closing price.

The fall in Trent pulled the Nifty 50 lower by 0.1%, which closed 0.4% lower at 23603.35 points Thursday. The overall market continued to decline on uncertainties about US policies in the near term. Some caution ahead of the Reserve Bank of India's monetary policy outcome also added to the worry. While many market watchers anticipate the RBI to cut the repo rate by 25 basis points to 6.25%, there is a section that believes there will not be a reduction this time too. 

Traders net added short positions to the February futures contract of the Nifty 50, which closed at 23706.90 points, a premium of 103.55 points to the spot index. The Nifty 50 closed at 23603.35 points, down 0.4%, on Thursday.

--Nifty 50 Feb closed at 23706.90, down 65.70 points; 103.55-point premium to spot index
--Nifty 50 Mar closed at 23850.00, down 65.80 points; 246.65-point premium to spot index
--Nifty 50 Apr closed at 23990.00, down 72.05 points; 386.65-point premium to spot index

State Bank of India, Trent, HDFC Bank, Bajaj Finance, ICICI Bank, Reliance Industries, Bharti Airtel, Infosys, Axis Bank, Zydus Lifesciences, REC, ITC, and BSE were the most actively traded underlying stocks Thursday.  End

Edited by Akul Nishant Akhoury

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