Options traders are positioning for renewed turbulence in India's stock market as diplomatic friction threatens to undermine a fragile US-Iran ceasefire.
A day before high-stakes negotiations in Pakistan, NSE data from Thursday revealed a surge in option selling. The activity suggests the Nifty 50 will face stiff resistance at the 24,000 mark, while downside support is expected to hold between 23,000 and 23,500 through Tuesday.
The market’s caution follows a volatile session where the Nifty 50 fell 0.9% to close at 23,775.10 points, and the S&P BSE Sensex dropped 1.2% to 76,631.65. The decline retraced a portion of Wednesday’s 4% rally, which had been sparked by President Trump’s announcement of a two-week pause in hostilities.
Technical Resistance
The 24,058 level has emerged as a critical threshold for technical analysts. This figure represents a 50% retracement of the index's rally from its multi-month low in April to its January record high.
“The substantial option writing of calls at 24,000 shows that it's a strong resistance,” said Kruti Shah, quant analyst at Equirus Securities. “Market behavior at this level needs to be watched carefully to ascertain if the recovery can sustain.”
Geopolitical Friction
The optimism surrounding the truce is being tested by disagreements over extending the ceasefire to Lebanon and the reopening of the Strait of Hormuz. These tensions have kept energy prices elevated; brent crude has surged 33% to $96.62 a barrel since the conflict began on 28 February.
{{/usCountry}}The optimism surrounding the truce is being tested by disagreements over extending the ceasefire to Lebanon and the reopening of the Strait of Hormuz. These tensions have kept energy prices elevated; brent crude has surged 33% to $96.62 a barrel since the conflict began on 28 February.
{{/usCountry}}“The war will be over only when Israel wants it to be over,” said Shankar Sharma, a UAE-based investor. He warned that India's stock market faces a “troublesome situation”, noting that portfolio returns may remain muted as they have for the past two years.
Institutional Divergence
While the Nifty 50 recovered from a 52-week low of 22,182.55 struck last Thursday, foreign portfolio investors remain skeptical. FPIs were net sellers of ₹1,335.53 crore in cash on Wednesday despite the massive rebound. Conversely, domestic institutional investors provided a cushion, net buying ₹4,168.17 crore.
Swarup Mohanty, vice chairman and chief executive of Mirae Asset Investment Managers (India), suggested that while volatility will persist, a retest of last week’s lows is unlikely unless the geopolitical situation worsens. “I will wait and see how the ceasefire unravels,” Mohanty said, adding he intends to use market dips to remain fully invested.
The original version of this story appeared on livemint.com.