Index options on National Stock Exchange(NSE) hit a new high

The index options traded on the NSE clocked the highest ever daily turnover on a non-expiry day on Thursday, triggered by huge intra-day volatility and wild swings in the price of banking stocks.

The total traded turnover of Rs1,96,601 crore on NSE index options is also the seventh highest ever, if one were to include the trading on expiry days.

Experts believe that the sharp 128.40-point swing in Nifty – the highest since Budget day – may have led to this. “The high volatility was due to panic-selling by traders in bank stocks which in turn led to fall in the index followed by short covering once the banks issued clarification. Also, the positive inflation data led to delta hedgers reversing their positions,” said Rikesh Parikh, VP-Markets Strategy and Equities, Motilal Oswal Securities.

The banking sector, which constitutes more than one-fifth of Nifty index, saw a sharp fall of over 2%, led by private banks on money laundering allegations made by Cobrapost against top three private banks. But then, low inflation data and clarifications by the top managements helped them rebound over 4.2% to close up 2.08%.

Siddarth Bhamre, head (derivatives), Angel Broking, said the first hour of trade saw heavy action on the puts side followed by squaring of these put positions and frenzied activity on call options side.

“With market swinging both ways sharply, it was a perfect day for trading and on such a day, what better than using ‘options’? Also, there has been huge activity by FIIs on options side of late that further led to high volumes,” he said.

The Nifty plunged to 5791.25 before recovering and going all the way up to 5920.15 before closing at 5908.95 on Thursday.

Going ahead, experts see markets maintaining momentum in the near term till the RBI policy meet on March 19. “The banking stocks and markets have already discounted the policy rate cut of 25 bps. So, at best we may see Nifty rising to 5980 to 6000 levels, but from thereon global liquidity will drive the markets. Considering the dollar-euro exchange rate trajectory, it’s not a good sign for high-beta stocks,” said Bhamre.

@nitinpshri