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Informist, Friday, Feb. 7, 2025

By Anjana Therese Antony

MUMBAI – After the Reserve Bank of India failed to meet investors' expectations on liquidity measures and economic growth forecast, bulls and bears appeared to be unclear about the direction of the Indian market. Premiums across call and put options of Nifty 50 expiring Thursday declined amid the expensive valuations in the domestic market, the absence of further measures to ease liquidity in the banking system, and on uncertainty about US policies, analysts said. Traders also added short positions to the futures segment of the index, which also mirrored the weakness in the cash market.

Adding to the worries is the recurring selling by foreign investors. "The US is the most stable market now...and they will continue to see more FII and FDI flows. So why will they come to India?," said Vinit Bolinjkar, head of research at Ventura Securities, adding that he does not expect much inflows for the near term.

"At this point, we need some clarity on next steps of the US administration. Earnings are poor again and valuations are expensive...all of these may keep the market down at least in the short term," a research analyst at a domestic broking firm said. President Donald Trump's tariff imposition on some of its key trading partners had hit global markets and continues to weigh on sentiment. 

In line with expectations, India's apex bank reduced the repo rate by 25 basis points to 6.25% and maintained its neutral stance. However, it did not announce further measures to improve liquidity, unlike what it did last time by reducing the cash reserve ratio. New Governor Sanjay Malhotra also sounded cautious and said that India is not immune to global uncertainties, though the Indian economy is strong and resilient. The central bank also reduced the GDP growth forecast for the two quarters ending June and September and said it has taken account of the rupee's depreciation for the growth projection. 

The slight gains in the equity market following the repo rate cut did not sustain after the RBI's announcements on economic growth. The volatility in the market on the policy outcome day was similar to most policy days in the last two years, barring the one in June which took place in the mid of General Elections. Except for this day, the market had seen less than 1% gains or losses. Headline indices fell over 0.5% during the day and came off lows. The Nifty 50 closed 0.2% lower at 23559.95 points and the Sensex ended 0.3% lower at 77860.19 points Friday. The near-term support for the 50-stock index is seen at 23500-23450 points and resistance at 23650-23800 points.

In the options chain of the Nifty 50, premiums declined for 23600-24000 calls and 23500-22000 put options. The highest addition of open interest was at 25000-point call and 23200-point put contracts. The 25500 strike price of call and put options have the highest open interest concentration. Traders added short positions to the February and March futures contracts of the index, which also closed marginally lower. 

--Nifty 50 Feb closed at 23622.85, down 66.05 points; 62.90-point premium to spot index
--Nifty 50 Mar closed at 23770.00, down 65.30 points; 210.05-point premium to spot index
--Nifty 50 Apr closed at 23901.95, down 74.60 points; 342.00-point premium to spot index

State Bank of India, HDFC Bank, Bharti Airtel, Mahindra & Mahindra, Bajaj Finance, Trent, ICICI Bank, Reliance Industries, Kotak Mahindra Bank, Axis Bank, Tata Steel, REC, Hero MotoCorp, ITC, and BSE were the most actively traded underlying stocks Friday. End

Edited by Akul Nishant Akhoury

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