BackBearish India bets jump to 14-month high as stocks reach record
The 50-stock Nifty rallied 1.7% to an all- time high of 8,695.60, capping a fourth day of gains
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Mumbai: Options traders in India increased bearish bets to a 14-month high while stocks surged to a record, as they brace for greater volatility before the federal budget.
The ratio of outstanding CNX Nifty index puts to calls rose to 1.4 at 4:06 pm in Mumbai, the highest since 31 October 2013, according to data compiled by Bloomberg. The India VIX Index fell 2.1% to 17.27 at the close for its first decline in three days. The 50-stock Nifty rallied 1.7% to an all- time high of 8,695.60, capping a fourth day of gains.
The buildup in puts comes amid uncertainty linked to global and local events, such as the European Central Bank’s (ECB) policy outcome, company results for October-December period and the federal budget expected next month, said Supreeth Shankarghal, a Bengaluru-based director at hedge fund QF Assets.
“Institutional investors don’t want to be caught on the wrong foot, and so they are hedging their cash positions through puts as stocks have rallied sharply," Suniil Pachisia, vice president at Pratibhuti Viniyog, said by phone from Mumbai on Tuesday. “Foreigners are selling derivatives and are buying in cash market."
Overseas investors purchased $197 million of stocks on 16 January, taking this year’s inflows to $156 million, according to data compiled by Bloomberg. Foreigners sold a net $106 million of Nifty options yesterday, halting 22 straight days of net purchases, the longest streak since August 2007, data compiled by Bloomberg show.
Reserve Bank of India governor Raghuram Rajan, who lowered borrowing costs to 7.75% from 8% last week, has said continuing disinflationary pressures and the government’s fiscal consolidation would be critical for further easing of monetary policy.
Five out of the six Sensex companies that have so far announced results for the December quarter have beaten or matched analyst estimates. Profits at 67% of the Sensex companies beat or matched estimates in the September quarter, versus 46% in the three months ended June and 60% in March, data compiled by Bloomberg show.
The Nifty has risen 5% this month, after climbing 31% last year for its best annual increase since 2009. The gauge is valued at 15.9 times its projected 12-month earnings, compared with 10.7 times for the MSCI Emerging Markets Index. Bloomberg
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