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Tuesday, January 31, 2023

Equity Futures: Bullish bets in IT cos on hope of improved earnings

Informist, Monday, Jan 9, 2023


By Vaibhavi


NEW DELHI – The information technology pack bounced back today as investors lapped up shares from the sector at discounted prices after last week’s sharp correction, on hope of improved Oct-Dec earnings.


The quarterly earnings of three frontline information technology companies–Tata Consultancy Services, HCL Technologies and Wipro, will remain in focus this week. While TCS released its Oct-Dec earnings after market hours today, the other two will detail their quarterly numbers through the week.

The optimism over improved earnings among traders reflected in their positioning in the derivatives segment. While stocks like Tata Consultancy Services, HCL Technologies, ad Infosys saw addition of long positions, Tech Mahindra witnessed covering of short positions in their January futures contract.


“There was a strong positive traction within the information technology space ahead of the Oct-Dec numbers of key IT heavyweights. We sense that this positive momentum is likely to continue higher in the near term, but it also remains to be seen how companies declares their outlook,” said Rajesh Bhosale, technical and derivative analyst at Angel One.


Nonetheless, it seems like the IT pack is done with its recent underperformance. Within the sector, HCL Technologies and Tata Consultancy Services are looking much better, analysts said.


Premiums across out-of-the-money call options of HCL Technologies and TCS skyrocketed as traders anticipated  further gains in these counters. For Infosys and Wipro, premiums for out-of-the-money call options were up around 50%.


Bhosale expects HCL Technologies to move higher towards 1,140-1,160-rupee levels in the coming sessions, while pegging support for the stock at 1,000 rupees. As far as TCS is concerned, he expects the stock to test levels around 3,500 rupees, while a fall in case of a weak commentary is likely to be restricted by the support at 3,200 rupees.


Technical analysts also expect IT counters to outperform in 2023 and hence suggest investors to use any dip as a buying opportunity.


Today, shares of Tata Consultancy Services, HCL Technologies, Tech Mahindra and Infosys ended 2.5-3.4% higher.


The Nifty 50 managed to stage a recovery after the sell-off last week on the back of easing rate hike concerns. However, positioning in the derivatives segment suggested that the index may not be out of the woods yet as it continues to face a strong resistance at around 18300 points.


However, the recovery today did trigger some covering of short positions as open interest in the January futures contract of the index rose 2.5%. Nonetheless, a stronger short covering move can come by only after the Nifty 50 surpasses 18300 points, analysts said.


On the downside, support remains intact at 17800 points. Today, the Nifty 50 ended 1.4% higher at 18101.20 points.


–Nifty 50 Jan closed at 18161.80, up 218.70 points; 60.60-point premium to spot index

–Nifty 50 Feb closed at 18230.00, up 221.65 points; 128.80-point premium to spot index

–Nifty 50 Mar closed at 18315.00, up 235.30 points; 213.80-point premium to spot index


The total turnover in the futures and options segment of the NSE was 149.75 trln rupees, against 128.11 trln rupees on Friday. 


The turnover in index options was 146.83 trln rupees compared with 125.27 trln rupees in the previous session. The total premium turnover of index and stock options was 525.64 bln rupees compared with 563.27 bln rupees on Friday.


Bajaj Finance, Titan Co, HDFC Bank, Axis Bank, ICICI Bank, Reliance Industries, Infosys, Adani Enterprises, Tata Consultancy Services and State Bank of India were among the most actively traded underlying stocks.  End


Edited by Tanima Banerjee


For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.


Cogencis news is now Informist news. 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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