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Business News/ Markets / Stock Markets/  Volatile Nifty hits record high, call option writers lose shirts
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Volatile Nifty hits record high, call option writers lose shirts

The Sensex, which recouped all of its losses to close in the green, failed to surpass its record high of 73,427.59 on 16 January, ending the day up 0.74% at 73,158.24.

The recovery in the last hour and a half of trade was driven by domestic institutions buying in tech, FMCG stocks and Reliance.Premium
The recovery in the last hour and a half of trade was driven by domestic institutions buying in tech, FMCG stocks and Reliance.

Mumbai: The Nifty soared to a record high of 22,252.50 for the fourth straight session on Thursday after gyrating 377.25 points between the day’s low and high. The recovery in the last hour and a half of trade was driven by domestic institution buying in technology, fast moving consumer goods (FMCG) stocks and Reliance, after artificial intelligence (AI) major Nvidia soared 14% in pre-market trading on the Nasdaq in the US, causing a global stock markets rally.

Domestic institutional investors (DIIs) net purchased shares worth a provisional 1,828.63 crore while FIIs net sold shares worth 1,410.05 crore. Additionally, option sellers covered their bearish bets.

The high intraday volatility, attributed by market analysts to the weekly expiry of the Nifty option contracts, resulted in call option sellers losing their shirts because of the steep recovery in the last hour and a half of trade.

The index opened with gains of 26 points at 9:15 am, but the gains were wiped out quickly as selling engulfed the market and dragged the Nifty down four-fifths of a per cent to an intraday low of 21,875.25 points by 11 am. The index traded in the red until 2 pm, after which bulls emerged and pulled up the benchmark to a record high before closing up 0.74% to 22,217.45.

Such was the nature of the recovery that the 22000 Nifty call option which traded at 8.25 a share (50 shares equal one contract) expired at 217.05, a whopping 26-fold jump intraday.

“Thursday’s highly volatile trade is because of the Nifty weekly options expiry," said Rajesh Palviya, senior VP at Axis Securities. “The bulls trapped the call writers who sold an incremental 30.89 lakh shares a day before buying index stocks heavily after 2 pm on Thursday in response to the blowout rally in Nvidia, which caused the index to reverse its losses and hit a record high."

The Sensex, which recouped all of its losses to close in the green, failed to surpass its record high of 73,427.59 on 16 January, ending the day up 0.74% at 73,158.24.

The major contributors to the Nifty’s 162.4 point rally included cigarette maker ITC (22.48 points), TCS (22.15 points), Reliance Industries (21.74 points) and Infy (21.06 points). The biggest losers, led by the banking pack, included SBI, Kotak Mahindra Bank, HDFC Bank and IndusInd Bank which corrected between 0.7% and 1.87%.

“Our base case is the Nifty consolidating in a 21,300-22,000 range, which it has traded between for the past two months, with chances of a breakout higher than those of a breakdown," said Gaurav Dua, head, capital market strategy at Sharekhan by BNP Paribas. “This consolidation has been good, absorbing the rally in the second-half of last year, the impact of the Interim Budget, the RBI policy and the Q3 results which didn’t have any negative surprises. During this period the excessive froth in the micro-cap and small-cap spaces has also been removed."

While DIIs are driving the market rally, FPIs continue to shift flows from India to Korea and Taiwan, which are cheaper, according to brokerage Nuvama. In the year to date while FPIs have sold shares worth $3.12 billion in India, Korea has attracted flows of $6.87 billion and Taiwan $4.5 billion.

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Published: 22 Feb 2024, 07:45 PM IST
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