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Equity Futures: Bearish bets in mid-caps on dismal Jul-Sep earnings

Informist, Friday, Oct 22, 2021


By Ankika Biswas


MUMBAI– Bears continued to rule the mid-cap space today as dismal Jul-Sep earnings by companies in this space dented their outlook. Scrips such as IndiaMART InterMESH, LIC Housing Finance, Mphasis among others witnessed strong build-up of short positions in the derivative segment.


The stock of IndiaMART InterMESH fell 9% intraday in the spot market to a one-month low of 7,800 rupees on weak Jul-Sep earnings. This triggered bearish bets in the stock’s derivatives segment. The 37% rise in the open interest of the October futures contract suggested a strong build-up of short positions on fears of further correction in the stock.


Consequently, the 8,000-, 8,400- and 8,500-rupee strike-price out-of-the-money call options were sold, resulting in an 82-89% fall in their premiums. Positioning in the derivative segment suggests that the weakness in the stock is likely to persist going further.


Today, the scrip closed nearly 8% lower at 7,911.75 rupees.


Similarly, investors added short positions in LIC Housing Finance, as indicated by the 13% rise in the open interest of October futures contract of the stock. This followed the scrip’s over 8% fall in the spot market due to dismal Jul-Sep earnings.


Traders sold the out-of-the money call options of 420-, 425- and 430-rupee strike prices amid a negative outlook for the stock, resulting in an over 85% fall in each of their premiums. 


As per positioning in the derivatives segment and given that the scrip has entered into a corrective phase, it is likely to fall further to 360-380 rupees, said an analyst at Axis Securities, who recommended investors to sell the scrip at any rise towards 430 rupees.


Today, the stock closed 7% lower at 408.50 rupees.


Among other mid-cap stocks, shares of Mphasis also witnessed build-up of short positions, while those of TVS Motor Co saw build-up of long positions on strong Jul-Sep earnings.


Given that both the mid-cap and small-cap stocks along with the large-cap ones are now witnessing selling pressure, analysts said that the sentiment in the market has turned negative. 


With the Nifty 50 falling for the fourth session, they believe that the headline index has now entered into a corrective phase and is expected to fall further to 17700-17800 points. The outlook remains negative until the index closes above its resistance of 18400 points.


With the upcoming week being an earnings-heavy one and with expiry of the monthly derivatives contract, analysts believe that the headline Nifty 50 may settle at around 18000 points when the weekly options of the index expire on Thursday. 


The 18200, 18300 and 18400-strike price call options were sold, resulting in a 27-38% fall in their premiums. While the action in the options segment was on a bearish note, the activity in the futures segment continued to be muted.


The open interest of the October futures contract of the index fell 0.7%. The 50-stock index closed 0.4% lower at 18114.90 points, sharply off the day’s low of 18034.35 points.


-–Nifty 50 Oct ended at 18138.85, down 64.05 points; 23.95-point premium to spot index

-–Nifty 50 Nov ended at 18185.65, down 70.90 points; 70.75-point premium to spot index

-–Nifty 50 Dec ended at 18273, down 63.70 points; 158.10-point premium to spot index


Total turnover in the futures and options segment of the NSE was at 50.24 trln rupees today, much lower than the 147.85 trln rupees on Thursday.   


The turnover in index options was at 44.38 trln rupees, lower than 142.86 trln rupees in the previous session. The total premium turnover of index and stock options was 324.44 bln rupees compared with 352.43 bln rupees on Thursday.


Reliance Industries, Tata Motors, Indian Energy Exchange, ICICI Bank, Tata Steel, State Bank of India, Adani Ports and Special Economic Zone, and ITC were the other most actively traded underlyings today.  End



Edited by Maheswaran Parameswaran


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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Source: Cogencis

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