Equity Futures: Bullish bets hint Hero MotoCorp may gain near term

Informist, Wednesday, Apr 27, 2022


By Abhishek Saini

MUMBAI – Shares of Hero MotoCorp have risen around 9%, defying the volatile trend seen in headline indices, this week. As a result, the derivatives segment of the stock continued to see bullish bets and analysts expect further gains in near-term. 


The April futures contract saw open interest rise by 19% while the contract value rose nearly 4% indicating the build up of long positions. Addition of open interest in the May futures contract was even higher at 37% indicating a strong appetite among traders who expect more gains in the stock. 


In the options segment, out-of-the-money call options with 2,520- and 2,540-rupee strike prices saw significant addition of open interest and their premiums surged four times. 


Put writers were active in 2,400-, 2,420- and 2,440-rupee strike prices. These contracts saw a significant addition in open interest, while their premiums dropped more than 90%.  


Analysts expect the stock to continue its momentum in the near-term. However, given the April expiry on Thursday, the stock may close around 2,500 rupees. 


If the shares of the company can close around 2,550-rupee level on Thursday, we recommend investors to buy the stock with a potential upside of 10-15% in the near term, said Bhuvan Jindal, derivatives analyst with Edelweiss Wealth Management, 


Today, the stock ended 3.9% higher at 2,500 rupees. 


On the other hand, for the frontline Nifty 50 index, bets in the derivatives segment indicated caution and suggested a range-bound movement on Thursday. The index today dropped below the 17000-point level, to an intra-day low of 16958.45 points, but recovered in the second half of the session to end 0.9% lower at 17038.40 points. 


Analysts attributed the fall to unwinding of long positions as open interest in the April futures contract fell 8% today. Though, another likely reason for the drop in open interest could be the expiry of the April series on Thursday. 


The 17000-point strike price put option had the highest open interest concentration and the level is likely to act as a support for the index. The highest open interest at 17000-point strike indicated that put option writers are not expecting the Nifty 50 to close below this level, said Ruchit Jain, lead strategist, If the market falls below this during the day, then there would be tug-of-war which could lead to higher intraday volatility, Jain added.


Meanwhile, call writers added positions in out-of-the-money call options at 17100- and 17200-point strikes, and their premiums nearly halved. 


In case of any positive global cues, the upside is likely to be capped around 17250 points, said Jindal. 


–Nifty 50 Apr ended at 17059.05, down 144.95 points; 20.65-point premium to spot index

–Nifty 50 May ended at 17083.90, down 150.40 points; 45.50-point premium to spot index

–Nifty 50 Jun ended at 17116.00, down 150.30 points; 77.60-point premium to spot index


Total turnover in the futures and options segment of the National Stock Exchange was about 98.8 trln rupees, compared with 76.8 trln rupees on Monday.

The turnover in index options was 94.1 trln rupees, as against 71.5 trln rupees during the previous session. The total premium turnover of index and stock options was 371.4 bln rupees, compared with 348.4 bln rupees on Tuesday.


The most actively traded underlying stocks were HDFC Bank, Adani Ports and Special Economic Zone, ICICI Bank, Reliance Industries, Infosys, Bajaj Finance, Tata Consultancy Services, Tata Steel, and Housing Development Finance Corp. 




Edited by Aditya Sakorkar


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