Informist, Monday, Jul 11, 2022

By Joe Milton

MUMBAI – The information technology pack came under selling pressure following weak earnings of Tata Consultancy Services for Apr-Jun, which led to the addition of bearish bets in the derivatives segment. 

Open interest in the July futures of TCS, Infosys, HCL Technologies, Wipro, and Persistent Systems surged 7-20%, while the contracts' value dropped, indicating the addition of short positions. 

In the call options segment, put writers unwound their position at the 3,200-rupee strike price, while traders added positions at the 3,100-rupee strike price. 

Shares of TCS have little chance to rebound from current levels and on the downside, they may find support around the 3,050-rupee level, said Ratnesh Goyal, senior technical and derivative analyst at Arihant Capital Markets. 

The limited upside for TCS is evident from the significant addition of open interest across the 3,200-3,500 rupee strike prices in the call options segment. The stock closed 4.6% lower at 3,113.80 rupees. 

Traders placed aggressive bearish bets on HCL Technologies too, as the company is scheduled to detail its Apr-Jun earnings on Tuesday and analysts largely expect margins to contract. 

If shares of HCL Technologies fall below their 52-week low of about 944 rupees, further selling pressure is expected.

However, amid the expectation that the stock may find support around the 900-rupee level, put option sellers added positions at this strike price. In fact, the highest open interest in the put options segment was at the 900-rupee strike price. 

While the technology space exhibited weakness, news that the government was considering a proposal to cut xport duty on certain steel products boosted sgares of metal companies. Shares of Tata Steel and JSW Steel gained sharply and closed about 3% and 2% higher, respectively. 

In the call options of Tata Steel, writers unwound positions at the 900- and 1,000-rupee strike prices. But analysts expect the stock to inch towards 960 rupees in the near term. Today, it closed at 912.75 rupees.  

Overall, the Nifty 50 index managed to recoup most of the day's losses and closed marginally lower at 16216 points. In the call options of the Nifty 50 expiring on Thursday, traders continued to add significant open interest at the 16200 strike price. 

The highest open interest in the put options segment was at the 16000 strike price. 

"Any declines in Nifty 50 towards 16000-15950 points would then provide a good risk-to-reward ratio for the short term. The immediate resistance for Nifty 50 is seen around 16300 points," said Ruchit Jain, lead research analyst, 5paisa.com.           

--Nifty 50 Jul closed at 16189.00, down 36.20 points; 27.00-point discount to spot index

--Nifty 50 Aug closed at 16208.00, down 36.50 points; 8.00-point discount to spot index

--Nifty 50 Sep closed at 16251.85, down 30.05 points; 35.85-point premium to spot index

The total turnover in the futures and options segment of the National Stock Exchange stood at about 65 trln rupees, against 46.06 trln rupees on Friday.

At about 62 trln rupees, the turnover in the index options was higher than 43.5 trln rupees in the previous session. The total premium turnover of index and stock options was much lower at 321.8 bln rupees compared with 283.04 bln rupees on Friday.  

Tata Consultancy Services, Reliance Industries, Tata Steel, ICICI Bank, Bharti AIrtel, Adani Enterprises, HDFC Bank, Infosys, Axis Bank, HCL Technologies, JSW Steel, and Tata Motors were the most actively traded underlying stocks today.  End

Edited by Avishek Dutta

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