Banking stocks showed a positive bias in the futures and options market ahead of the Reserve Bank of India's monetary policy decision, with traders covering short positions in Bank Nifty and several lenders. HDFC Bank, however, moved against the broader trend as its futures declined and open interest increased, indicating fresh short positions.
Bank Nifty's August futures rose 0.64% to 58,083.80, while open interest fell by 987 contracts to 70,610. The combination of higher futures prices and lower open interest pointed to short covering ahead of the policy announcement.
The positioning comes as the RBI's Monetary Policy Committee is expected to keep the repo rate unchanged at 5.25% and retain its neutral stance, according to a Bloomberg survey of economists. The central bank's assessment of inflation will remain in focus as the Middle East conflict keeps energy prices elevated.
Inflation remains within the RBI's tolerance range of 2% to 6%, but policymakers are likely to assess whether higher fuel costs could feed into broader prices.
Short Covering Seen Across Banking Futures
Axis Bank's August futures gained 0.74% to Rs 1,261.30 as open interest slipped by 31 contracts to 128,822. Bank of Baroda futures rose 1.45% to Rs 250.21, while open interest declined by eight contracts to 44,571.
Bank of India showed a similar trend. Its August futures advanced 1.68% to Rs 142.60 as open interest fell by 115 contracts. Bandhan Bank's August contract rose 1.08% to Rs 175.12, with open interest declining by 95 contracts.
The positioning extended beyond stocks where open interest declined. Kotak Mahindra Bank, RBL Bank, AU Small Finance Bank and ICICI Bank featured among contracts showing accumulation, where futures prices and open interest moved higher.
Kotak Mahindra Bank futures rose about 0.8%, while AU Small Finance Bank gained about 0.9%. ICICI Bank's August futures advanced 0.45% to Rs 1,452, with open interest at 148,542 contracts.
HDFC Bank Bucks Broader Trend
HDFC Bank was the main exception to the positive positioning across banking futures. Its August futures fell 0.11% to Rs 742.85 even as open interest increased by 3,746 contracts to 465,508, indicating fresh short positions.
The trend was also visible across its later expiries. The September contract showed higher open interest alongside a lower futures price, while the October contract recorded a 12.76% increase in open interest as futures declined.
Options positioning in Bank Nifty also showed concentration around the 58,000 strike. The open interest distribution showed the largest call open interest at this level, while put open interest was also concentrated around the same strike. This makes 58,000 a key positioning zone ahead of the RBI decision.
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The RBI's inflation commentary will remain a focus for traders after the policy decision, particularly as elevated energy prices raise the risk of higher input costs feeding into consumer prices.
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