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Informist, Wednesday, Jul. 30, 2025

By Akash Mandal

MUMBAI – Options data show traders expected gains in the Nifty 50 to be capped in the near term despite the index having gained for the last two consecutive sessions. The rise in the index is because of foreign investors covering their short positions ahead of the monthly expiry of the Nifty 50's derivatives contract and challenges such as stretched stock valuations and soft June quarter earnings continue to weigh on sentiment.

Traders added short bets at out-of-the-money call strike prices between 24900 and 27300, implying a limited upside for the 50-stock index from current levels. On Wednesday, traders covered their short positions at in-the-money call strike prices of 22250-24750, which helped the Nifty 50 to end 0.1% higher at 24855.05 points.

They also closed their positions across many in-the-money strike prices. The maximum open interest on the call side was at the 25000 strike price, implying a tough climb past the psychologically crucial level for the Nifty 50. 

On the put side, traders added bullish bets across many out-of-the-money strike prices between 22250 and 24850, indicating that the 50-stock index may consolidate in the next few sessions rather than falling sharply. Traders also cut their short bets across many deep in-the-money and deep out-of-the-money contracts.

Some analysts have raised concerns regarding the Indian market's attractiveness for foreign investors due to high valuations and slow earnings growth. "Indian equities' high valuations and slowing profits are inverting buyer-seller incentives...insiders (promoters/PE) are on a selling spree, whereas domestic flows are slowing (1-year returns flat or underperforming debt). FII flows are, hence, now critical," Nuvama Institutional Equities said in a strategy report. "India's appeal among emerging markets is fading given a high valuation premium amid a blunted earnings edge," the brokerage said.

So far in the June quarter, most large-cap players have delivered sluggish earnings growth, with some sections of the small- and mid-cap stocks being the saving grace. However, Nuvama sees risks associated with such stocks to be more. "SMIDs are likely to be more vulnerable to supply deluge given higher valuations and large earnings expectations amid slowing domestic growth (which is more critical for SMIDs)...essentially, earnings revival is necessary to incentivise buyers," the brokerage said.

--Nifty 50 Jul closed at 24860.00, up 21.20 points; 4.95-point premium to the spot index

--Nifty 50 Aug closed at 24952.00, up 17.30 points; 96.95-point premium to the spot index

--Nifty 50 Sep closed at 25092.00, up 8.40 points; 236.95-point premium to the spot index

HDFC Bank, Reliance Industries, ICICI Bank, Larsen & Toubro, Mahindra & Mahindra, Infosys, State Bank of India, Axis Bank, Bharti Airtel, Tata Motors, Bajaj Finance, Tata Consultancy Services, Punjab National Bank, and Hindustan Unilever were the most active underlying stocks Wednesday.  End

Edited by Nishant Maher

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