Call options in State Bank of India, the nation’s largest lender, climbed to a two-week high, signaling expectations that the stock may rebound after valuations fell to the lowest level in more than a year.
The lender had 29,007 calls and 8,149 puts outstanding as of 3:46 p.m. in Mumbai, making it the most popular stock for options trading as of Tuesday, data compiled by Bloomberg show. The put-call ratio of 0.28 compares with an 11-week low of 0.2665 at Monday’s close. The stock rose 1.7 percent to 254.6 rupees, while the CNX Nifty index gained 0.4 percent.
The increase in calls follows a 18 percent drop in State Bank’s shares this year amid concern about bad loans. The stock is valued at 1.2 times its projected 12-month net assets, near the lowest level since May 2014. The Nifty has decreased 4.6 percent this month after central bank Governor Raghuram Rajan cut interest rates for a third time this year and said further easing would depend on the progress of monsoon rains.
“Sentiment has improved for state-owned banks including SBI as with the progress of the monsoon, the concerns over inflation have receded,” Nilesh Dedhia, a Mumbai-based director at Vidhi Wealth Management Ltd., which oversees about $236 million in assets, said in a phone interview. “There is call buying as stocks have dropped sharply.”
The Indian government will boost the size of an annual cash infusion into state-owned banks this year as the country seeks to maintain the flow of credit and bolster capital buffers after bad debts rose to a 13-year high. The increased allocation comes after central-bank data showed stressed assets at Indian lenders climbed to the highest level since 2001 and capital ratios declined.
State Bank call options with a strike price of 300 rupees had the highest open interest. Among puts, the option with an exercise price of 250 rupees was the most popular.
The India VIX Index, a measure of demand for protection against stock-market swings using options, fell 2 percent to 17.2. The 30-stock S&P BSE Sensex dropped 0.4 percent.