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Informist, Monday, May 12, 2025

By Anshul Choudhary

MUMBAI – Traders added long positions and covered their short positions after India and Pakistan announced an understanding Saturday to cease military actions, and the US and China lowered tariffs against each other. This was a bonanza for market participants who had grappled with extreme volatility in the market for the past five weeks mainly on account of these two issues.

The Nifty 50 Monday crossed its immediate resistance levels and ended 3.8% higher at 24924.70 points, its highest closing level in over six months. Options data suggest traders are now eyeing the 25000 level and beyond, which had seemed unlikely until last week.

However, some suggest high premiums on the put side might be an indication that some pullback is likely soon. "This rally was surprising and options premiums are still high... we might see some scale-back to 24000-24200 points by the end of the month," said Raj Deepak Singh, derivatives analyst at ICICI Direct Research.

India announced on the weekend that it had reached an agreement with Pakistan to end military action. While there were some doubts about whether Pakistan would honour the agreement, there has been no report so far of shelling along the border Sunday night. The government announced Monday that it had resumed civil operations at 32 airports that were temporarily closed because of the spiralling conflict.

Markets opened higher on news of the agreement and gained further after the US and China reached a trade agreement. The US has agreed to cuts tariffs on Chinese goods to 30% from 145%. China will reciprocate by cutting tariffs on US goods to 10% from 125% earlier. However, this is temporary relief. The agreement to lower tariffs is for just 90 days.

For call options expiring Thursday, the highest addition of open interest was seen at 25500-26200 points, indicating hopes of a further gain. Call options also saw short covering at in-the-money strike prices.

On the put side, traders sold contracts across the board with the highest addition of open interest at the 24500 strike price. Analysts expect the 24500 level to act as a key support this week.

Nifty 50 futures contracts also saw the addition of long positions. The May contracts ended at a premium of over 100 points to the spot index with open interest rising over 5% to 13.26 million.

--Nifty 50 May closed at 25051.00, up 985.50 points; 126.30-point premium to the spot index

--Nifty 50 Jun closed at 25153.10, up 978.80 points; 228.40-point premium to the spot index

--Nifty 50 Jul closed at 25278.40, up 963.40 points; 353.70-point premium to the spot index

HDFC Bank, ICICI Bank, Infosy, Reliance Industries, State Bank of India, UPL, Hindustan Aeronautics, Tata Motors, BSE, Interglobe Aviation, Bharat Electronics, Larsen & Toubro, Bajaj Finance, Coforge, and Tata Consultancy Services were the most active underlying stocks Friday.  End

Edited by Rajeev Pai

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