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Wednesday, August 17, 2022

Equity Futures: Nifty 50 consolidates, options hint at limited upside

Informist, Friday, Aug 5, 2022


By Joe Milton


MUMBAI – The Nifty 50 index witnessed consolidation today in the absence of any negative surprise from the Reserve Bank of India. Going forward, the derivatives segment suggests a limited upside for the index. 


The repo rate hike of 50 basis points by the Monetary Policy Committee, and the central bank’s projection for inflation and real GDP growth, were on expected lines which helped the Nifty 50 stay in the green for the most of the day. 


However, traders were cautious ahead of the US employment data for July due later today. Apart from this, the overbought condition of the Nifty 50 also prompted traders to remain on the sidelines. 


In the call option segment of the Nifty 50 expiring on Aug 11, the highest open interest was at 17500 points. “Nifty 50 is expected to face stiff resistance at 17500-17550 points as it is a strong supply zone,” said Ratnesh Goyal, senior technical and derivative analyst at Arihant Capital Markets. 


Hence, experts recommended lightening up long positions in case the Nifty 50 moves towards 17500 points. However, any fall in the index towards 17150 points can be used to initiate long positions. 


Fundamental analysis also indicates limited upside in the near term as the Nifty 50’s price-to-earnings ratio at the current level is above its 10-year average, said Siddhartha Khemka, head-retail research, Motilal Oswal Financial Services.


Open interest in the August futures of the Nifty 50 rose 2.2% to 10.2 mln, which indicates no significant long positions were added today, Goyal said. 


The 50-stock index ended 0.1% higher at 17397.50 points after traversing between an intraday high and low of 17474.40 and 17348.75 points, respectively. The index struggled to close above 17400 points for the third consecutive session today.


The Nifty Bank is also expected to consolidate, and the index may face resistance at around 38000 points as the highest open interest in the call option segment was at this strike price. 


Today, the Nifty Bank ended 0.4% higher at 37920.60 points. 


Among specific stocks, Balkrishna Industries witnessed huge addition of short positions following weak Apr-Jun earnings. The open interest in the August futures jumped 45% to 2.1 mln, while the contracts were down 7% at 2,160.05 rupees. 


In the spot market, the stock closed 6.8% lower at 2,162.80 rupees. In case of follow-up selling in the stock, it may slip below 2,100 rupees and is likely to find support at around 2,020 rupees level. 


–Nifty 50 Aug closed at 17414.95, up 27.10 points; 17.45-point premium to spot index

–Nifty 50 Sep closed at 17481.65, up 26.55 points; 84.15-point premium to spot index

–Nifty 50 Oct closed at 17521.75, up 28.00 points; 124.25-point premium to spot index


The total turnover in the futures and options segment of the National Stock Exchange was 74.4 trln rupees compared to 312.3 trln rupees on Thursday.    


The turnover in index options was 71.2 trln rupees compared to 308.9 trln rupees on Thursday. The total premium turnover of the index and stock options was 416.8 bln rupees compared to 642.2 bln rupees in the previous session. 


Reliance Industries, HDFC Bank, ICICI Bank, Titan Co, State Bank of India, Mahindra & Mahindra, Bharti Airtel, Infosys, NMDC Ltd, and Adani Enterprises were among the most actively traded underlying stocks.  End


Edited by Aditya Sakorkar


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Source: Cogencis

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