Equity Futures
Bears see more downside for IT cos post Citi's cautious view
This story was originally published at 17:42 IST on 19 March 2025
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By Alina Geogy
MUMBAI – Global brokerage firm Citi's cautious outlook for Indian information technology companies led traders to add short positions in the options contracts of most of these stocks on Wednesday. These bearish bets came after Citi attributed its cautious outlook for the near term to heightened global uncertainty and macroeconomic data from the US, a crucial market for these companies.
Most information technology stocks fell despite gains across most sectors. The Nifty IT index snapped a two-day winning streak and closed 1% lower, with eight of its 10 constituents in the red. Shares of Infosys, Tata Consultancy Services, LTIMindtree, and Tech Mahindra were down 1-3%. Wipro and L&T Technology Services were the only two stocks in this index which ended higher.
The Nifty IT index is still trading at a high valuation despite a 16% correction so far in 2025, ET Now reported, quoting Citi. Margin improvement for domestic IT companies could also be difficult amid a competitive environment, as per the report. The brokerage expects the revenue growth of Indian IT companies to be around 4% in 2025-26 (Apr-Mar), which is similar to the revenue growth in FY25, the report said.
The addition of short bets was seen on options contracts of Tech Mahindra, LTIMindtree, Tata Consultancy Services, Infosys, HCL Technologies, Coforge, Mphasis, and Persistent Systems. Premiums fell 5-57% for call options contracts of these eight stocks where shorts were added.
Shares of Tech Mahindra clocked the largest fall among Nifty IT constituents, closing 2.4% lower at INR 1,396.15. The premium fell 46% for its call option contract with the highest change in open interest, while it rose 145% on its put option. The highest change in open interest was at the INR 1,400-call strike and at the INR 1,360-put strike, which hints at more downside than upside for the stock in the near term.
The fall in information technology stocks limited the rise in the benchmark Nifty 50 index. Together, all IT stocks weighed the index down by 0.1%. The Nifty 50 index closed at 22907.60 points, up 0.3%. During the day, the benchmark index hit a fresh one-month high of 22940.70 points, surpassing the 22900-point mark, which led traders to add bullish bets to its futures and options contracts.
Among the weekly options of the Nifty 50 expiring Thursday, the highest open interest addition on call contracts was at the 23300 and 23100 strikes, which are likely to act as a resistance for the index in the near term. Premiums on these contracts rose around 47%. Among weekly put options, the maximum addition of open interest was at the 22900 and 22800 strikes, and premiums on these contracts fell 46-54%. The March futures contract of the Nifty 50 closed at 22969 points, at a premium of 61.40 points to the spot index. Open interest in this contract rose 1.3% to 16.98 million, according to provisional data.
--Nifty 50 Mar closed at 22969.00, up 73.60 points
--Nifty 50 Apr closed at 23123.00, up 91.40 points; 215.40-point premium to spot index
--Nifty 50 May closed at 23241.00, up 93.90 points; 333.40-point premium to spot index
HDFC Bank, Bajaj Finance, Reliance Industries, ICICI Bank, State Bank of India, Tata Steel, Interglobe Aviation, Hindustane Aeronautics, Zomato, Tata Consultancy Services, Infosys, Bharat Electronics, NTPC, REC, Kotak Mahindra Bank, Tata Power Co., DLF, and Axis Bank were the most actively traded underlying stocks on the National Stock Exchange. End
Edited by Akul Nishant Akhoury
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