Alpha trade - Long HDFC, Short Nifty: ICICIdirect.com

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Alpha trade - Long HDFC, Short Nifty: ICICIdirect.com

ICICIdirect.com has come out with its report on alpha trading strategy. The research firm has recommended to buy HDFC Ltd March futures in the range of 714-718 and Sell Nifty March futures in the range of 5569-5579.

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ICICIdirect.com has come out with its report on alpha trading strategy. The research firm has recommended to buy HDFC  March futures in the range of 714-718 and Sell Nifty March futures in the range of 5569-5579.

Parameters:
Current Price Ratio (Nifty/HDFC Ltd): 7.75
Target: 7.0
Stop loss: 8.1
Execute the strategy with a rupee neutral basis.

Rationale:
• HDFC is one of the few index stocks, which has remained a laggard in the current market rally. However, in the last few sessions, HDFC has seen an increase in cash-based delivery. We expect the positive bias in the market to eventually lead to short covering in the stock.

• The 200 DMA of HDFC is placed at 675, which is likely to act as major support on declines

• We believe to keep the index momentum intact, the leadership may be taken by HDFC from hereon. It has moved up after consolidation in the range of 690-710 and fresh upsides towards 750-770 levels can be seen

• In comparison to last year's low of 4530, the open interest addition is still high in HDFC. It suggests the short positions are still quite hefty in the stock. Hence, the short covering, which started of late, may provide much needed cushion to the stock

• After the recent pullback, the price ratio of (Nifty/HDFC) is likely to fall from the current 7.75 to 7.00 levels. Hence, we recommend a Long HDFC and Short Nifty Alpha trade at current levels

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment