Buy Axis Bank, stock likely to move above resistance of Rs 520: Amit Gupta

Amit Gupta, Head-Derivatives  at ICICIdirect told CNBC-TV18, "The component of Bank Nifty which we are buying is Axis Bank. In the last six-seven months, the stock has done nothing. It has remained in range but whenever it has fallen below Rs 500, the delivery pick up has been excellent."

"Recently, we saw Rs 504-505 delivery pick up has again started above Rs 500 levels. Yesterday, after South Indian Bank's results we saw the stock moving up from Rs 504 to 514. So, my sense is that it is gearing up for a move beyond Rs 520 levels which has remained a very crucial resistance for the stock and in that case if you look at the Future positions, slowly the positions are building up in Futures too."

"We have seen around 8 percent addition in the current series and there is enough headroom, looking at the open interest which is still lower. If they are adding the stock, you will see more momentum coming up in the coming sessions in it," he said.

"We are buying 140 Call option of Gujarat State Fertilizers & Chemicals (GSFC). If you look at the month of August, there was almost 65 percent of open interest addition which was clearly in the long side and that came near the price of Rs 130. The stock moved up and then came down closer to these levels but those positions remain intact and we saw good rollover from September to October series of GSFC long positions."

"Now if you look at the current series, another 5 percent addition has been seen in the last session. So, my sense is it is gearing up for a breakout now and it has already been consolidating for the last six-seven months in this range, above Rs 120-130 levels."

"So 140 Call, if you look at, there has been a good buying happening there, the implied volatility (IV) has suddenly spurted. It means the out-of-the-money (OTM) call options, this was OTM but in yesterday's session it became Almost at-the-Money (ATM)."

"So my sense is that it is moving towards Rs 155, so better buy the Call option where the premiums are still lower, looking at the IV pattern because just recently only they have started moving up. So my sense is it may be a good trade in the coming sessions."

"GNFC which is not in the Futures and Options (F&O) has been performing much better and GSFC holds almost 20 percent stake in the stock, so there maybe some pullback because of that thing," he added.