Cholamandalam Investment Gains 3.57%: 5 Key Factors Driving the Week’s Volatility

23 February: Renewed Market Interest Drives Sharp Open Interest Surge

Cholamandalam Investment & Finance Company Ltd began the week on a strong note, with its stock price rising 1.17% to close at Rs.1,690.65, outperforming the Sensex’s 0.39% gain. This price appreciation coincided with an 18.3% surge in open interest in the derivatives segment, reflecting a significant increase in market participation and fresh positioning by traders. The open interest rose from 33,499 to 39,625 contracts, accompanied by a futures volume of 22,028 contracts and a combined futures and options value of approximately ₹14,208.6 crores.

This surge in derivatives activity suggests renewed investor confidence and anticipation of directional moves, supported by the stock’s relative strength within the NBFC sector. Despite the positive momentum, the stock remained below its short- and medium-term moving averages, indicating potential resistance ahead.

24-25 February: Continued Gains Amid Mixed Market Sentiment

The stock extended its gains on 24 February, climbing 2.64% to Rs.1,735.35 despite the Sensex declining 0.78%. This divergence highlighted selective buying interest in Cholamandalam, supported by strong volume of 42,257 shares. On 25 February, the stock further advanced 1.10% to Rs.1,754.45, with a substantial volume surge to 1,48,463 shares, signalling robust investor participation. The Sensex recovered modestly by 0.41% that day.

These two days of gains brought the stock to its weekly high of Rs.1,754.45, reflecting sustained optimism. However, the broader market’s mixed performance and the stock’s position relative to moving averages suggested cautious optimism among investors.

26 February: Intraday Price Pressure Amid Elevated Volatility and Heavy Options Activity

On 26 February, Cholamandalam experienced significant intraday volatility, hitting a low of Rs.1,628.45, a sharp 7.18% drop from the previous close. The stock closed down 0.35% at Rs.1,748.30, underperforming the Sensex’s 0.19% gain. This price pressure coincided with a record traded volume exceeding 35 lakh shares and a turnover of nearly ₹59,563.5 lakhs, underscoring strong institutional interest despite the correction.

The weighted average price volatility was elevated at 5.49%, reflecting heightened sensitivity to market dynamics. Technical indicators showed the stock trading below its 5-day, 20-day, 50-day, and 100-day moving averages, signalling short- to medium-term weakness, though it remained above the 200-day average, indicating long-term support.

Notably, delivery volumes declined by 22.58% compared to the five-day average, suggesting reduced conviction among long-term holders amid profit-booking or cautious repositioning.

26 February: Divergent Options Market Signals – Surge in Both Call and Put Activity

The derivatives market on 26 February revealed contrasting investor sentiment. Call options at the ₹1,800 strike for the 30 March expiry saw a surge in volume with 4,724 contracts traded, generating a turnover of ₹75.38 crores. This activity indicated bullish positioning, with traders anticipating a potential upside exceeding 5.7% within the next month.

Conversely, put options exhibited heavy trading at strikes near and below the current stock price, notably 5,710 contracts at the ₹1,700 strike and 5,054 contracts at ₹1,600, signalling bearish hedging or downside protection. The combined turnover in put options exceeded ₹30 crores, reflecting cautious sentiment amid recent price weakness.

This divergence between call and put option activity highlights a market balancing act between optimism for a rebound and caution against further declines, underscoring the stock’s elevated volatility and uncertain near-term trajectory.

Weekly Price Performance: Cholamandalam vs Sensex

Key Takeaways from the Week

Positive Signals: Cholamandalam outperformed the Sensex by 4.53 percentage points over the week, closing with a 3.57% gain. The sharp rise in derivatives open interest early in the week indicated renewed market interest and fresh positioning. Despite short-term volatility, the stock remains above its 200-day moving average, signalling long-term support. The Mojo Grade upgrade to Buy with a score of 71.0 underpins confidence in the company’s fundamentals and growth prospects.

Cautionary Signals: The intraday price pressure and elevated volatility on 26 February, coupled with heavy put option activity, reflect increased bearish hedging and profit-booking. The stock’s trading below several short- and medium-term moving averages suggests resistance and potential consolidation. Declining delivery volumes indicate waning conviction among long-term holders, warranting vigilance amid near-term uncertainty.

Conclusion: Navigating Volatility Amid Mixed Sentiment

Cholamandalam Investment & Finance Company Ltd’s week was characterised by a blend of optimism and caution. Early-week gains and a surge in derivatives activity highlighted renewed investor interest and potential for upside. However, the sharp intraday correction and contrasting options market signals on 26 February underscored the stock’s elevated volatility and mixed sentiment.

The stock’s ability to maintain support above its long-term moving average, combined with its upgraded Mojo Grade, suggests a solid fundamental base. Yet, the short-term technical pressures and heavy put option volumes indicate that investors should monitor price action closely for confirmation of sustained momentum or further consolidation.

Overall, Cholamandalam’s performance this week reflects the dynamic interplay of market forces within the NBFC sector, emphasising the importance of a balanced approach to risk and opportunity in the current environment.

Only Rs. 9,999 - Get MojoOne for 1 Year + 3 Months FREE (60% Off) Start Today