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Wednesday, October 27, 2021

Equity Futures:Profit booking to keep IT cos under pressure near term

Informist, Monday, Oct 11, 2021

 

By Vivek Kumar

 

MUMBAI – Shares of information technology companies may remain under pressure in the near term, with data in the derivatives segment indicating that investors may continue to book profits as they do not see any immediate upside in the stocks.

 

However, analysts point out that the long-term view for the sector remains bullish and one can utilise the dips to buy the stocks.
 

Following a sharp correction in information technology major Tata Consultancy Services’ shares today, the call writers turned active. Investors sold out-of-the-money call options across information technology companies, indicating that profit booking will likely continue.

 

Positioning in the options of Tata Consultancy Services showed that a quick bounce back may be unlikely for the stock, as it may consolidate near its current levels in the upcoming sessions before resuming gains.

 

The premiums of 4,000 rupees and 3,800 rupees call options fell around 70%, while aggressive buying was seen at 3,500 rupees and 3,700 rupees put options. The TCS stock closed 6.4% lower at 3,685.60 rupees and was the worst hit on the Nifty 50, as its consolidated revenue and operating margin for Jul-Sep missed the Street’s estimates.

 

The open interest in the stock’s October futures surged nearly 40% to 11.46 mln, as per provisional data, indicating that short positions were added today.

 

The call option writing and aggressive put option buying was prominent in other mid-sized information technology companies as well. Mindtree, Mphasis and Coforge saw rise in major put option premiums, while out-of-the-money call option premiums fell.

 

Going with the trend, Infosys, Tech Mahindra, Wipro and HCL Technologies too saw some fall in their major call option premiums, indicating that pressure is likely to persist in the near term.

 

While information technology companies may remain under pressure, the bull run in the shares of Tata Motors may not stop, market participants said.

 

The premiums of 430 rupees and 425 rupees call options of Tata Motors jumped 140% today and witnessed the maximum addition of open interest. On the other side, the premium of 400 rupees put option tumbled 64%, indicating good support for the stock at that level.

 

The stock has given a good breakout after several months and may move higher towards 450 rupees going ahead, said Ratnesh Goyal, senior technical and derivatives analyst at Arihant Capital Markets.

 

The stock closed 8.6% higher at 415.75 rupees in the cash market today.

 

With stock-specific action continuing to be prominent, the benchmark Nifty 50 may move in the range of 17600-18000 points and may not see any sharp upside in the upcoming few sessions, analysts said.

 

Positioning in the options of the index showed that a few investors expect it to again move towards the 18000 points mark this week itself. 

 

The 50-stock index surpassed the 18000 points level for the first time today and hit a lifetime high of 18041.95 points. However, it closed sharply off highs at 17945.95 points, up 0.3%.

 

-–Nifty 50 Oct ended at 17975.35, up 75.25 points; 29.40-point premium to spot index

-–Nifty 50 Nov ended at 18005.00, up 71.30 points; 59.05-point premium to spot index

-–Nifty 50 Dec ended at 18050.00, up 80.90 points; 104.05-point premium to spot index

 

Total turnover in the futures and options segment of NSE was 45.28 trln rupees today, compared with 37.6 trln rupees on Friday.  

 

The turnover in index options was about 41.08 trln rupees compared with 33.6 trln rupees in the previous session. The total premium turnover of index and stock options was 264.02 bln rupees compared with 252.3 bln rupees Friday.

 

Tata Motors, Tata Consultancy Services, Indian Energy Exchange, Infosys, Tata Power Co, Reliance Industries, State Bank of India, HDFC Bank, ICICI Bank, DLF, ITC, Tata Steel, Wipro, Bank of Baroda and HCT Technologies were the other most actively traded stocks today.  End

 

Edited by Pranav S. Joshi

 

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

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© Informist Media Pvt. Ltd. 2021. All rights reserved.

 

Source: Cogencis

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