Amit Gupta of ICICI Direct says in this series whenever Nifty sees any intermediate profit booking for one or two sessions, one should ride the Put options rather than panicking and looking for an upward target.
In an interview to CNBC-TV18, Amit Gupta, Head- Derivatives of ICICI Direct spoke about the outlook for the F&O market.
Below is a verbatim transcript of the interview:
Q: What would you watch out on the Nifty and the Bank Nifty, are you expecting now the bulls to get bolder and go to higher strikes and on the Bank Nifty will there be more covering you think?
A: We have remained quite positive in Nifty in this particular series because we believe that the traders who made the money in the previous series were the Call writers and in this series if anybody is making money is the Put writer.
The Put open interest (OI) is climbing higher. Since the starting of this month, we are seeing Put-Call ratio (PCR) OI continuously moving up. It has moved up to 1.3 now. I feel that the way the volatility has come down over the period from 20, now it is coming down to 19, possibly it can come down to 17.5 also, slowly the Put writers are making money.
In addition, if you look at the foreign institutional investment (FIIs) positions, they expired a lot of short positions in the previous series. In this particular series on three-four occasions, we have seen more than Rs 1,000 crore of index future buying by the FIIs. If you look at Nifty futures OI also, it is slowly inching up. The long formation is definitely done and that is why whenever the market is coming down is finding a lot of support. The volume weighted average price (VWAP) of this series, which is at 5,900, was one of the reasons why Nifty didn't breach this level this time when it was coming down.
We have seen the rollover of the short Put positions from 5,800 to 5,900 now. So that has become an intermediate support. In this particular series whenever market is seeing any intermediate profit booking for one or two sessions, you should ride the Put options rather than panicking and look for the upward target. Within one-two months, it is possible that the Nifty may go towards 6,200 or 6,300 levels also on the higher side.
Q: What is your strategy on the Reliance Capital for the day?
A: Anil Dhirubhai Ambani Group (ADAG) stocks are absorbing the selling pressure pretty nicely. If you look at Reliance Capital, all the major 50-days and 100-days moving averages are placed around Rs 350 and we have seen the OI started moving up. It seems that people are forming long positions in the stock and Rs 380 level is possible where the Call option base is pretty higher.