Informist, Tuesday, Jul 26, 2022

By Ankika Biswas

MUMBAI – Traders unwound existing long positions in the derivatives segment of the Nifty 50 as the index slipped below the crucial support of 16500 points on selling ahead of the US Federal Reserve's July policy meeting later today.

Persistent selling pressure may pull the index down to 16360-16400 points, said Rajesh Bhosale, technical analyst at Angel One. Backing this view was the strong open interest addition at the 16400-strike price put option.

Further, the over 8% fall in open interest of the July futures contract suggested the unwinding of bullish bets.

With the two days' of fall, the bullish momentum has somewhat eroded, Bhosale said. There are some chances of bargain buying and even recovery in the headline index going ahead, according to him. However, the market trend will hinge on the Fed's rate action and commentary on inflation and future growth.

In case of a possible recovery, the upside in the Nifty 50 is seen capped at 16630-16700 points. A strong build-up of open interest was seen at 16600 and 16700 strike price call options.

The index is seen consolidating at 16400-16700 points ahead of the Fed meet outcome on Wednesday and the expiry of the monthly derivative series on Thursday. Today, the Nifty 50 closed 0.9% lower at 16483.85 points. 

Among notable movers, strong bearish bets were seen in the July and August futures contract of Infosys, going by the sharp rise in open interest. The stock was the worst hit on the Nifty 50 today, and has lost over 5% in three days.

As the short-term structure remains weak, analysts expect Infosys' shares to test 1,400 rupees, going by the maximum open interest concentration at that strike price put option.

Foreseeing another 3-4% fall, analysts advised investors to avoid buying at current levels, but can do so once the stock touches 1,400 rupees. Today, it closed over 3% lower at 1,451.15 rupees.

Hurdles to the near-term earnings growth have hit investor appetite for the information technology pack. In fact, strong unwinding of long positions and even fresh short positions were seen across most IT stocks today.

--Nifty 50 Jul closed at 16479.60, down 152.50 points; 4.25-point discount to spot index

--Nifty 50 Aug closed at 16490.00, down 155.25 points; 6.15-point premium to spot index

--Nifty 50 Sep closed at 16527.00, down 165.85 points; 43.15-point premium to spot index

The total turnover in the futures and options segment of the National Stock Exchange was about 90.22 trln rupees, higher than the 82.57 trln rupees on Monday.

The turnover in index options was 84.79 trln rupees, as against 77.23 trln rupees on Monday. The total premium turnover of index and stock options was at 364.55 bln rupees compared with 379.04 bln rupees on Monday.  

Reliance Industries, HDFC Bank, Infosys, Axis Bank, ICICI Bank, Asian Paints, Adani Enterprises, Bajaj Finance, Tata Steel and Maruti Suzuki India were the most actively traded underlying stocks.  End

Edited by Aditya Sakorkar

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