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Informist, Wednesday, Jul. 2, 2025

By Anshul Choudhary

MUMBAI – Concerns around high stock valuations likely pushed traders to add short positions and cut their long positions in Nifty 50 options. Data suggests the index may fall further after it breached the immediate support levels but any fall is expected to be minor.

Nifty 50 has been gaining on hopes of better earnings growth in the second half of this financial year. Analysts expect earnings to improve amid lower interest rates and also as people start getting the benefit of tax relief announced in the Budget.

These expectations have pushed the Nifty 50 closer to its lifetime high in the past few months. Wednesday, the index ended slightly lower at 25453.40 points, but it is up over 17% from its 52-week low touched two months ago and just 3% below its lifetime high of 26277.35 points.

Wednesday, the index faced selling pressure at higher levels and ended below its immediate support levels. This pushed traders to sell call options across the board, indicating expectations of a further fall in the Nifty 50. For contracts expiring Thursday, traders added the highest open interest at 25450-25600 strike prices.

"With most of the positives already priced in (for the Nifty 50), there appears to be limited room for further valuation expansion," IDBI Capital said in a strategy report. "In the short term, the market is likely to consolidate and remain range bound as it digests recent gains."

Valuation concern likely pushed traders to buy in-the-money and at-the-money put options. Significant open interest addition was seen at 25350-25450 puts and these levels are likely to act as immediate support for the Nifty 50 in the coming sessions.

For now, traders unwound their long positions largely at 25650-25700 puts after the Nifty 50 fell. However, traders also bought out-of-the-money put options below 25250 strike prices, indicating expectations of a bounce-back in the Nifty 50 after a small fall.

The July futures contract of the Nifty 50 closed at a premium of 86.50 points to the spot index. Open interest in the contract fell 0.4% to 14.49 million, according to provisional data.

--Nifty 50 Jul closed at 25539.90, down 103.40 points; 86.50-point premium to the spot index

--Nifty 50 Aug closed at 25645.00, down 111.90 points; 191.60-point premium to the spot index

--Nifty 50 Sep closed at 25797.10, down 113.00 points; 343.70-point premium to the spot index

Infosys, ICICI Bank, Dixon Technolgoies, HDFC Bank, Bharat Electronics, State Bank of India, Tata Steel, IndusInd Bank, Tata Consultancy Services, Bajaj Finance, Vedanta, Tata Motors, Punjab National Bank, Axis Bank, JSW Steel, and Trent were the most active underlying stocks Wednesday. End

Edited by Akul Nishant Akhoury

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