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Equity Futures: Bearish bets show Tata Steel may lose more steam

Informist, Monday, Jun 20, 2022


By Ankika Biswas


MUMBAI – Bearish bets in the derivatives segment of Tata Steel suggest there’s more room for the stock to fall. Today, the stock slumped over 7% intraday to a 14-month low as weak demand outlook continued to exert pressure on shares of all metal companies.


Aggressive policy tightening measures by various central banks, coupled with reimposition of COVID-19 restrictions in China, a major consumer of metals, have led to fears of a demand slowdown. 


An over-7% rise in open interest of June futures contract suggested build-up of short positions.


Traders sold out-of-the-money call options, betting on continued selling pressure on the stock. On the other hand, premiums on the 820- and 840-rupee strike prices put options saw a double-digit rise.


Although some bounce back is expected after today’s sharp losses, the stock is seen falling to 830-840 rupees apiece as the overall trend remains negative, said an analyst at Axis Securities. He recommended avoiding fresh short positions as of now, but advised doing so only during a rebound in the stock.


Today, Tata Steel stock closed 5% lower at 861.40 rupees apiece ON THE NATIONAL STOCK EXCHANGE, after falling to 842.65 rupees intraday, and was the biggest laggard on the Nifty 50.


Bearish bets were also seen in Hindalco Industries and Oil and Natural Gas Corp due to steep losses in the cash market. ONGC closed 5% lower at 134.40 rupees apiece today on the NSE, as falling global crude oil prices threatened the company’s profitability.


As any pullbacks are likely to get sold into, analysts see ONGC shares falling further to 125 rupees apiece.


Meanwhile, the headline Nifty 50 managed to snap a six-day losing streak amid bargain buying following the over-5% losses last week. However, analysts advised investors to not read too much into the gains, ruling it as a pure bounce back move.


Given the trend remains negative, they recommended remaining cautious even if the 50-stock index manages to bounce back to 15450-15500 points.


In the options segment, the maximum open interest addition at the 15500-strike price call option suggests an immediate hurdle for the index at that level. On the other hand, support is seen at 15000 points, going by the highest open interest build-up at that put option.


Today, the Nifty 50 closed 0.4% higher at 15350.15 points. Open interest in the June futures contract was up nearly 2%.


–Nifty 50 Jun closed at 15366.00, up 46.75 points; 15.85-point premium to spot index

–Nifty 50 Jul closed at 15385.50, up 49.10 points; 35.35-point premium to spot index

–Nifty 50 Aug closed at 15421.00, up 47.55 points; 70.85-point premium to spot index


The total turnover in the futures and options segment of the National Stock Exchange was 67.61 trln rupees, higher than the 61.28 trln rupees on Friday.


The turnover in index options was 64.41 trln rupees, higher than 58.08 trln rupees in the previous session. The total premium turnover of index and stock options was 392.49 bln rupees, lower than 453.45 bln rupees on Friday.

Reliance Industries, HDFC Bank, Tata Steel, Adani Enterprises, Tata Power, Housing Development Finance Corp, ICICI Bank, Maruti Suzuki India, Vedanta, and Infosys were the most actively traded underlying stocks.  End


Edited by Deepshikha Bhardwaj



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Source: Cogencis

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