Indian Stocks Drop on Middle East Tensions as Axis Securities Recommends Bull Call Spread
Indian benchmark indices retreated on Tuesday driven by geopolitical risks and higher oil prices, prompting brokerages to recommend defined-risk options strategies to navigate near-term market volatility.
Indian stock markets closed lower on Tuesday as the recent escalation of the US-Iran war in the Middle East and elevated crude oil prices dampened investor risk appetite. The BSE Sensex dropped 408.59 points, or 0.53 percent, to 77,207.81, while the Nifty 50 slipped 113.35 points, or 0.47 percent, to 24,097.65.
Broader indices faced similar selling pressure, with both the Nifty Midcap 100 and Nifty Smallcap 100 declining by more than half a percent. Sectoral performance was mixed, as Auto, PSU Bank, Realty, FMCG, and IT indices posted losses, whereas Pharma and Metals managed to trade in positive territory. The Bank Nifty underperformed the broader market, falling 608.05 points, or 1.05 percent, to 57,524.70.
Derivatives Outlook and Strategy
For derivatives traders, the current environment suggests a bounded trading range amid this macroeconomic uncertainty. Axis Securities noted that the highest open interest on the call side sits at the 24,500 strike, followed by 24,300, which could act as near-term resistance levels. Conversely, put-side open interest peaks at 24,000 and 23,800, establishing potential support zones.
With the at-the-money option premium currently at ₹377, the brokerage projects a likely weekly trading range for the Nifty between 23,750 and 24,650. To capitalize on a moderately bullish outlook while capping downside exposure, Axis Securities recommended a bull call spread for contracts expiring on 21 July 2026.
The proposed strategy involves buying one lot of the 24,250 strike call option at a premium of ₹160 to ₹180. Simultaneously, traders are advised to sell one lot of the 24,500 strike call option at a premium of ₹70 to ₹80.
This structure sets the break-even point at 24,346, allowing market participants to target moderate returns with controlled risk. According to the brokerage, the maximum potential risk for this position is limited to ₹6,240, while the maximum potential reward stands at ₹10,010. Traders are advised to execute and square off all legs of the strategy together before the expiry session closes.
