Volatile Nifty hits record high, call option writers lose shirts

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₹1,828.63 crorewhile 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