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Informist, Tuesday, Apr. 29, 2025

By Anjana Therese Antony

MUMBAI – The options chain of defence companies such as Bharat Electronics and Hindustan Aeronautics indicates further upside for these stocks on expectations of orders from the government due to the conflict with Pakistan at the Line of Control. Adding to the optimism was the latest deal of the government with France for Rafale-Marine aircraft. Traders bought out-of-the-money call options of the two defence companies and premiums on their contracts almost doubled. Along with these two stocks, industry peers that are not part of the futures and options segment such as Mazagon Dock Shipbuilders, Cochin Shipyard, Garden Reach Shipbuilders & Engineers, and Data Patterns, closed higher for the second session in a row Tuesday. 

"Defence stocks continued their upward trend, driven by heightened geopolitical tensions and the finalisation of a 64,000 crore (INR 640 billion) inter-governmental agreement between India and France for 26 Rafale-M fighter jets for the Indian Navy," Siddhartha Khemka, head of research of wealth management at Motilal Oswal Financial Services, said in a post-market note Tuesday. Under the deal, French aircraft manufacturer Dassault Aviation will supply 22 single-seater and four twin-seater aircraft to India. The delivery of these aircraft will be completed by 2030, and the crew will undergo training in France and India, the government said in a press release Monday. 

The deterioration in relations between India and Pakistan has been weighing on market sentiment this week. Pakistan has shot down an Indian spy drone across the Line of Control in Pakistan-occupied Kashmir, Bloomberg reported citing the Pakistan state-run television channel. Tension between the two countries escalated after a terrorist attack in Jammu and Kashmir's Pahalgam on Apr. 22 which killed 26 tourists.

Shares of Bharat Electronics and Hindustan Aeronautics closed 4% higher each at INR 317.10 and INR 4,609.30, respectively, on the National Stock Exchange. In the options chain of Bharat Electronics, premiums on INR 320-INR 350 call options expiring May 29 rose 3-13%, while those on INR 320-INR 280 put contracts declined 30-36%. The maximum open interest addition as well as open interest concentration on the call side was at INR 350 strike. A similar trend was also seen in the options chain of Hindustan Aeronautics, where premiums on INR 4,600-INR 5,000 call contracts increased 66-97%, while those on INR 4,600-INR 3,200 put options declined 31-38%. 

Traders also added long positions in the futures series of both the companies and their May contracts closed around 4% higher each. In this series, open interest in Bharat Electronics rose 3.8% to 99.72 million and that in Hindustan Aeronautics grew 1.7% to 6.84 million. 

The domestic stock market saw muted gains Tuesday. The Nifty 50 closed just 7 points higher at 24335.95 points and the Sensex ended over 70 points higher of 0.1% at 80288.38 points. The near-term support for the 50-stock index is seen at 24100-24000 points and resistance at 24500-24600 points. Investors will continue to monitor developments between India and Pakistan and on earnings for the March quarter of domestic companies. Experts said the March quarter earnings have not shown any major improvement. The next few quarters are also likely to show slowdown in earnings growth.

--Nifty 50 May closed at 24429.00, down 23.80 points; 93.05-point premium to the spot index

--Nifty 50 Jun closed at 24538.00, down 19.80 points; 202.05-point premium to the spot index

--Nifty 50 Jul closed at 24673.10, down 10.60 points; 337.15-point premium to the spot index

Reliance Industries, Hindustan Aeronautics, Trent, Bharat Electronics, Bajaj Finance, HDFC Bank, State Bank of India, BSE, ICICI Bank, Tata Technologies, Infosys, TVS Motor Co., Federal Bank, Tata Motors, Ambuja Cements, Kotak Mahindra Bank, Axis Bank, UltraTech Cement, PNB Housing Finance, and Tata Consultancy Services were the most active underlying stocks on Tuesday.  End

Edited by Ashish Shirke

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