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Informist, Tuesday, Aug. 4, 2026

 

By Eshitva Prakash

 

MUMBAI – Traders sold call options across the Nifty 50 options chain on Tuesday after Monday's sharp rally left the market in overbought territory, prompting fresh call writing. The Nifty 50 had ended sharply higher Monday as thin-volume trading in the newly adopted auction settlement session favoured bullish bets. Analysts expect broader market participation and clearer price discovery in the coming weeks as traders adjust to the new auction settlement system. For now, analysts are using the Nifty 50's 1515 IST level, when continuous trading halts, to determine key technical levels. On that basis, 24600 points remains a major hurdle for the Nifty 50, even though the closing auction lifted the index above that level. 

 

For contracts expiring Aug. 11, traders sold call contracts and also unwound their long positions. A heavy open interest buildup at the 24600 strike indicates strong resistance for the Nifty 50. Premium at this strike declined nearly 30%. Traders also sold other deep-out-of-the-money contracts beyond this strike. Some traders also bought put options and premiums across 24100–24500 strikes increased sharply. A decline in open interest of several strikes below 24100 levels also indicated short covering, as traders do not expect a severe fall. The highest open interest on the put side formed at the 24000 strike price. Taken together, the current structure signals a range-bound movement for the 50-stock index in the near term.   

 

"The short-term market structure is still strong as long as the Nifty 50 trades above the 24200 level," Nandish Shah, senior derivative analyst at HDFC Securities, said. However, the analyst expects the Nifty 50 will find "strong resistance" if it tries to test the 24600 level. Traders will likely keep exiting positions before the cash market's continuous trading stops and while some may use naked calls after continuous trading stops, it will be a very risky move, analysts said. However, traders tried to benefit from this disparity between options and the cash market, with many betting on upward movement of call contracts. Premiums on the 24500 strike price expiring Tuesday ended at INR 114.70 from INR 54.05 at 1515 IST.

 

The closing auction session on Monday received limited interest from non-institutional traders. Several analysts had already advised traders to exit positions before the continuous trading session ended at 1515 IST. Thin liquidity led to the Nifty 50 rising 0.8% from where continuous trading ended. Stocks such as Grasim Industries closed over 5% higher, recording most of its gains during the closing auction session. Grasim Industries was the worst hit Nifty 50 stock Tuesday, with its shares falling nearly 4%. "Large institutional buy orders concentrated on the more liquid NSE during the thin auction window, sharply lifting several heavyweight constituents... it was pure demand-supply imbalance under the new mechanism, not a technical glitch," Santosh Meena, head of research at Swastika Investmart, said.

 

The Nifty 50 closed at 24614.90, down 159.40 points or 0.6% from Monday. The headline index ended 151 points higher than its 1515 IST level of 24463.45 points. "I think it will take at least one or two weeks for traders to figure out how this (auction) system works," Shah said. "There could be another gap-down on Wednesday, similar to today, and futures levels should give more clarity on the market's sentiment for now," Vipin Kumar, assistant vice president of research at Globe Capital Market, said. 

 

Traders unwound their long positions in information technology stocks ahead of expiry, with options contracts of Infosys, Tata Consultancy Services, and Wipro seeing a significant decline in open interest at near-the-money strike prices. These stocks have risen sharply in the last four weeks, benefiting from relatively cheaper valuations and the continued unwinding of the artificial intelligence trade.

 

--Nifty 50 August closed at 24552.30, down 97.10 points; 62.60-point discount to the spot index
--Nifty 50 September closed at 24670.00, down 90.00 points; 55.10-point premium to the spot index
--Nifty 50 October closed at 24815.00, down 72.10 points; 200.10-point premium to the spot index

 

Life Insurance Corp. of India, KEI Industries, HDFC Bank, One 97 Communications, Reliance Industries, BSE, Pidilite Industries, Infosys, Kalyan Jewellers India, and ICICI Bank were the most actively traded underlying stocks Tuesday.  End

 

Edited by Saji George Titus

 

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