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Informist, Friday, Feb. 14, 2025

By Anjana Therese Antony

MUMBAI – As the benchmark Nifty 50 hit an eight-month intraday low while falling for the eighth consecutive session Friday, traders in the derivatives market continued to add downside bets in anticipation of more pain in the near term. Short positions were added to the index options chain, with premiums on out-of-the-money call options falling over 30%, while those on puts rose more than 20%. The bear run is due to continuing foreign investor outflows, rising selling pressure among high net worth individuals, US tariff woes, disappointing growth in corporate earnings, and expectations of lower returns from the market, analysts said.

The 50-stock index fell over 1% to its eight-month low of 22774.85 points, but came off the low to close 0.4% down at 22929.25 points. The index fell below the psychologically important level of 23000 points. The near-term support for the index is now seen at 22800-22700 points and resistance at 23000-23200 points.

Premiums on call options at 23000-23500 strike prices expiring Thursday fell 27-40% and those on put contracts at 22950-22500 strikes declined around 23%. The highest addition of open interest was at the 26500-point call and 22000-point put. The futures contracts also hint at near-term pain for the index, with all three series--February, March, and April--showing only marginal gains for the Nifty 50. The February contract closed 0.6% lower at 22972.30 points.

India, a top pick of investors only a year ago, is unlikely to be able to shrug off the 'uderperformer' tag it acquired a couple of months back. With US President Donald Trump not hinting at any relaxation in tariffs and the US Federal Reserve "not in a hurry" to reduce interest rates, it is likely that India will not see a respite from the current bear run. "Short-term risks from reciprocal tariffs remain, but medium-term gains are possible once the dust settles on the trade war," Nomura Global Markets Research said in its report Friday. With Trump adding that reciprocal tariffs will also be used to address non-tariff trade barriers, India remains in his line of fire, the research firm said.

Amid the global woes triggered by US tariffs, foreign institutional investors are holding a whopping 84% short positions in index futures in India, sharply up from around 20% at the end of September. This is similar to the positions they held during the general election in the June quarter on fears of a slender win for the Bharatiya Janata Party.

--Nifty 50 Feb closed at 22972.30, down 135.45 points
--Nifty 50 Mar closed at 23115.00, down 127.20 points; 185.75-point premium to spot index
--Nifty 50 Apr closed at 23254.00, down 137.40 points; 324.75-point premium to spot index

ICICI Bank, HDFC Bank, Deepak Nitrite, Reliance Industries, State Bank of India, Hindustan Aeronautics, Laurus Laboratories, Kotak Mahindra Bank, Bajaj Finance, BSE, Axis Bank, Infosys, Adani Enterprises, Dixon Technologies (India), and Trent were the most actively traded underlying stocks on Friday.  End

Edited by Rajeev Pai

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