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Equity Futures: Traders sell out-of-the-money calls as Nifty 50 slips

Informist, Thursday, Sep 21, 2023

 

By Akshata Gorde

 

MUMBAI – Call writing was seen in out-of-the money options of the Nifty 50 index expiring next week, as the spot index closed lower for the third consecutive session today, after hawkish commentary by the US Federal Reserve.

 

Premiums at 19800-20000 call strikes expiring Sep 28 fell by 60-75%, with the highest open interest of 5.2 mln contracts at 19800 points. The Nifty 50 closed 0.8% or 159.05 points lower at 19742.35 points after trading in the red during the entire session today.

 

Aggressive call and put writing seen in at-the-money strike of 19700 points suggests a likely bounce back in the Nifty 50 on Friday, said Anshul Jain, senior technical analyst at Lakshmishree Investment and Securities Ltd. The premium at 19700 call strike fell by over 52%, and that of 19700 put strike rose by over 127%, the Nifty 50 option chain showed. 

 

Thw analyst said the fall in the market since Wednesday is likely to be a result of the Canadian Pension Fund selling its stake in index-heavyweights such as HDFC Bank Ltd, Reliance Industries Ltd, ICICI Bank Ltd, Kotak Mahindra Bank, among others. 

 

Along similar lines, Shrikant Chouhan, head of research at Kotak Securities Ltd, said there could be a "relief rally" if the Nifty 50 sustains above 19700 points. "Above 19700 (points), the market could rally till 19825-19875 points," he said in a note. "On the flip side, fresh selling is possible only after the dismissal of 19700 (points) and below the same, the index could slip till 19650-19600 (points)."

 

The Nifty 50 index has retraced almost half of its recent gains, said Ajit Mishra, senior vice president of technical research at Religare Broking Ltd. "It may take a breather now, but the upside seems capped, citing the underperformance of select heavyweights," he said.

 

Provisional data shows open interest in the September futures contract of the index fell 0.7% to 9.51 mln, indicating bearish positions being added, said Anshul Jain.

 

–Nifty 50 Sep closed at 19769.05, down 203 points; 26.70-point premium to spot index

–Nifty 50 Oct closed at 19890, down 197.75 points; 147.65-point premium to spot index

–Nifty 50 Nov closed at 20012, down 193.60 points; 269.65-point premium to spot index

 

HDFC Bank, ICICI Bank, State Bank of India, Reliance Industries, Canara Bank, Bank of Baroda, REC, Tata Motors, Axis Bank, Kotak Mahindra Bank, and Infosys were among the most-actively traded underlying stocks.  End

 

Edited by Vidhi Verma

 

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