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The Day That Was:
Nifty Futures: 24,431.4 (-0.5%), Bank Nifty Futures: 54,363.0 (-1.3%).
Nifty futures declined by 122 points, largely due to pressures in the financial sector as investors took profits after recent gains, resulting in losses for key equity indices and ending a two-day winning streak, indicating a shift in market sentiment. Bank Nifty faced significant pressure from the outset, closing down 718 points, marking the largest single-day percentage drop since early April 2024. This downward trend was exacerbated by disappointing earnings from Bank of Baroda, raising concerns over the financial sector's health. Sentiments were cautious following the Pahalgam terror attack; however, after the directive from the Minister of Home Affairs on Monday for mock drills for security preparedness further heightened the apprehension among market participants, especially in light of the geopolitical tensions between India and Pakistan. Consequently, the India VIX rose by 5.1% to 19.27, reflecting increased expectations of market volatility. In the foreign exchange market, the Indian rupee opened at 84.28 against the US dollar, fluctuated between 84.26 and 84.63, and closed at 84.43, down 15 paise from the previous session, indicating currency weakening amid global fluctuations. The Nifty futures premium fell from 93 to 52 points, while the Bank Nifty premium dropped from 161 to 92 points.
Global Movers:
US equities fell for a second day as the latest movements on trade negotiations fell short of investors' expectations. The S&P 500 fell 0.8% while the Nasdaq dropped 0.9%. The Fed will be announcing its rate decision later today and is widely expected to keep rates unchanged at 4.25% to 4.5%. Talking markets, the VIX rose 4.7%, the dollar index fell for a third day, the 10-year treasury yield dropped, bitcoin advanced for the first day in four, Gold put in a second day of near 3% gains and settled at a new record closing high of $3431, while nymex oil jumped 3.4% to finish at $59 after the US and China started trade negotiations and data showed that inventory levels dropped.
Stock Futures:
In yesterday's session, Hero Motocorp, Polycab India, Bank of Baroda, and Indian Hotels Company saw a significant rise in trading volume as well as increased price volatility. This indicates a boost in market activity and a rising interest from investors in these stocks.
Hero MotoCorp's stock price rose by 2.4% amidst robust daily trading volumes following the company's exchange filing announcing a Board of Directors meeting on Tuesday, May 13, 2025, to deliberate on audited standalone and consolidated financial results and a potential dividend declaration. This upward trajectory was further fueled by Federation of Automobile Dealers Associations (FADA) data, revealing Hero MotoCorp's leading retail performance in the two-wheeler segment for April, with 511,687 units sold, capturing a significant 30% market share. Concurrently, the counter witnessed short covering alongside price appreciation, evidenced by a negligible 0.6% contraction in open interest, translating to a net reduction of 204 contracts or 30,600 shares in the current futures open interest of 34,248 contracts. This confluence of positive price action, substantial volume, and limited short unwinding in the derivatives market underscores growing bullish momentum, predominantly driven by anticipations of financial results exceeding market expectations.
Polycab India's stock price extended its upward trajectory for the second consecutive session, appreciating by 1.8% to reach a near-three-month peak, supported by significant trading volume. This rally was primarily propelled by a robust 25% year-over-year revenue growth, surpassing consensus estimates. The company also reported substantial gains in profitability, with EBITDA expanding by 34.7% and margins improving by 110 basis points to 14.7%. Consequently, net profit surged by 35% year-on-year to Rs.727 crore. Adding to the positive sentiment, Polycab announced a dividend of Rs.35 per equity share for FY25, marking the highest pay-out in six years. Derivative analysis reveals short covering coinciding with the price ascent and an 11.2% reduction in open interest, representing a shedding of 2,233 contracts or 2.8 lakh shares, bringing the current futures open interest to 17,668 contracts. In the options segment, total call open interest stands at 12,742 contracts, while put open interest is at 8,787 contracts, resulting in a put-call ratio of 0.69, influenced by the addition of 5,897 call option contracts and 3,721 put option contracts. Despite the short covering and a higher increase in call open interest relative to puts, the price appreciation indicates prevailing bullish undertones driven by fundamental strength, although the contraction in overall futures open interest warrants careful observation for the sustainability of this momentum.
Bank of Baroda's stock plummeted by a significant 10.5%, its largest single-day fall on the highest trading volume since early June 2024, precipitated by disappointing Q4FY25 financial results revealing a modest 3.3% year-on-year increase in net profit. This subdued profit growth was attributed to elevated provisions and a soft net interest income, with the bank's domestic net interest margin (NIM) compressing to a 14-quarter low of 3.02% from 3.11% quarter-on-quarter. Derivative analysis indicates short addition coinciding with the price decline and a marginal 0.6% rise in open interest, translating to an addition of 219 contracts or 6.41 lakh shares, bringing the current futures open interest to 35,706 contracts. In the options market, total call open interest stands at 22,135 contracts, while put open interest is at 15,785 contracts. The addition of 12,877 call option contracts and 5,913 put option contracts has softened the put-call ratio to 0.71 from 1.07, signaling aggressive call writing and a prevailing bearish outlook as market participants brace for continued volatility and potential further depreciation. This substantial market reaction underscores investor apprehension regarding Bank of Baroda's immediate financial performance and future prospects.
Indian Hotels Company experienced a significant 6.5% decline in its stock price, marking the steepest fall in three months, amidst high trading volumes following its earnings release. Despite reporting a robust 25% year-on-year increase in Q4FY25 net profit to Rs.522 crore and a 27% jump in revenue, both profit and revenue witnessed a sequential dip, although EBITDA saw a 30% rise with margin expansion. Despite these seemingly positive figures, profit booking triggered a sell-off. Derivative analysis reveals short addition coinciding with the price decrease and a substantial 15.9% surge in open interest, reaching a year-high of 23,244 contracts with a year-high addition of 3,193 contracts, equivalent to 32 lakh shares. In the options segment, total call open interest stands at 18,390 contracts, while put open interest is at 8,724 contracts. The addition of 8,429 call option contracts and 1,865 put option contracts has caused the put-call ratio to plummet from 0.69 to 0.47, indicating a significant build-up in call open interest, with approximately four call options changing hands for every put option. This skew towards call options suggests increased hedging activity against potential price volatility or the adoption of bearish strategies through call writing, overriding the positive fundamental performance in the immediate market reaction.
Put-Call Ratio Snapshot:
The Nifty put-call ratio (PCR)fell to 0.92 from 0.97 points, while the Bank Nifty PCR fell from 0.93 to 0.86 points.
Implied Volatility:
Titan Company and Dixon Technologies (India) have experienced noteworthy changes in their stock prices, indicated by their implied volatility rankings of 81 and 84, respectively. Titan Company's implied volatility has soared to 28%, while Dixon Technologies (India) has reached 45%. This increase suggests that options are becoming more expensive, prompting traders to adopt risk management strategies in response to these market shifts. In contrast, Adani Green Energy has the lowest implied volatility rankings, closely followed by Adani Ports, with implied volatilities of 46% and 23%. These figures imply that their options may be more appealing for investors interested in long positions.
Options volume and Open Interest highlights:
Max Health and Hero Motocorp display a favourable market outlook, as evidenced by their robust call-put volume ratios of 4:1 and 3:1, respectively. This ratio indicates a strong appetite for call options, implying that the market expects climbing prices. However, the pronounced call skew may suggest potential overvaluation in the options market. Conversely, Kalyan Jewellers India and ICICI Bank show a significant put-call volume ratio, with increasing put volumes indicating a risk-averse sentiment driven by concerns over possible price declines. Yet, elevated put volumes could also denote an oversold condition, presenting contrarian trading possibilities. Regarding market positioning, Syngene International and Manappuram Finance reveal substantial open interest in call options, while Voltas Ltd and CDSL show considerable open interest in put options. This activity signals potential price volatility, which might serve as a resistance level or generate upward price movement. (This data considers only those stock options that saw a minimum of 500 contracts traded on the day for both calls and puts).
Participant-wise Open Interest Net Activity:
Yesterday's derivatives market activity revealed divergent positioning strategies among key participants. In index futures, a notable contraction of 3,357 contracts by client traders contrasted sharply with the accretive stances adopted by Foreign Institutional Investors (FIIs), who augmented their holdings by 2,222 contracts, and proprietary trading desks, which registered an increase of 2,858 contracts. Conversely, the stock futures segment exhibited a more uniform retrenchment, with client portfolios shedding a substantial 10,727 contracts, FIIs liquidating 2,804 contracts, and proprietary traders significantly reducing their exposure by 21,926 contracts.
Securities in Ban for Trade Date 07-May-2025:
1) MANAPPURAM
2) RBLBANK
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