F&O: July series to end around 5150-5100, says ICICI Direct

Amit Gupta, head - derivatives, ICICI Direct feels that despite breakouts or breakdowns the market is stuck in a range bound scenario. So, he expects the July series to expire around 5,150-5,100 levels.

Meanwhile, he expects the Bank Nifty to move in a broad range of 10,050-10,470. "The lower base where Put Options are still quite active is 10,000 and 10,100. So, 10050 will be the immediate support. On the higher side, we had immediate gap down around 10,470, those gap downs we are seeing in Nifty also not getting filled so far, so in Bank Nifty that will be the immediate resistance,"he elaborated. Below is the edited transcript of Gupta’s interview with CNBC-TV18. Q: What you have made of the NSE excluding 51 stocks from the derivatives market? How do you think the market will react to it? A: It is definitely a point that wherever these stocks have been taken out, around 8-9% of the total volume was there in the Futures segment and this volume will slowly be shifted to be other stocks which will be left. My personal feeling is that we will miss these stocks because the market has been more consolidating and we have seen that more oversold stocks started moving up recently. It is not a trending market where you have enough liquidity in one segment and you can ignore the other segment. If you look at the likes of Jet Airways, Aban Offshore or BGR Energy - we saw a lot of trading recommendations being given in these stocks just because they were reverting back and 5-10% of moves were there in these stocks. These stocks will be missed for the short-term. They are there for the next two contracts, but there maybe some short covering if the market holds these levels, because they were quite oversold. The short guy will be more uncomfortable in these stocks. There is one story going on that near September fundamentally good stocks from this lot may start seeing some cash buying rather than after the leverage is getting closed. For the time being, if market holds around 5050 there maybe some sort of covering coming in these stocks. If you look at the arbitrage positions in the last series, there was around 3-4% of reverse arbitrage positions coming up in these stocks. So, arbitrage guys also came into these stocks and provided little bit of liquidity. There were opportunities in the near-term in all of these stocks, at least 10-15% which possibly will be missed now. Q: How are you approaching the Bank Nifty for the next couple of days and any individual banks that you have a strategy on? A: I think 10050-10470 this is a broad range in which Bank Nifty will move now. The lower base where Put Options are still quite active is 10,000 and 10,100. So, 10050 will be the immediate support. On the higher side, we had immediate gap down around 10,470, those gap downs we are seeing in Nifty also not getting filled so far, so in Bank Nifty that will be the immediate resistance. Federal Bank in the midcap space may see some long liquidation because large caps also are not finding it easy to hold higher levels. Federal Bank’s last one or two months’ movement has outperformed the market a bit. We are seeing longs exiting in the range of Rs 420-440 and below Rs 420 from the stocks. It is breakdown in Federal Bank and it may go down till Rs 390.  Q: How do you approach the next couple of days till expiry now and what kind of note do you expect expiry to be on this time? A: One thing that has remained quite secular in this series is depreciation in Option premiums. Barring a two or three sessions where we cracked from 5,250-5,150 that was the time when the India VIX started moving up from pretty low levels of 15.7-18.5 odd levels. But look at the last session; we have seen volatility coming down quite sharply. It came down to again 16.5 levels. The market was not moving above 5,150 levels, it was hovering around 5,100 and at that time also, volatility came down. So, this has been the feature of this series. Despite the breakouts or the breakdowns, the market is not leaving the nature of range bound scenario. So, this expiry could be around 5,150-5,100 levels. The Options scenario is showing the range of 5000-5300 for the time being. 5000 Put has the highest base and 5300 Call has the highest base. When the market moved up in this particular rally towards 5,350 we saw that the Option writers, especially the Call writers were so convinced that the 5,400 Call premium was not escalating at all. The same pattern was seen at 5,300 Call and both the premiums have almost vanished now. We have seen the same thing is happening at 5200 Call Options. Any breakout can be seen only above 5,200 levels now. Till that time, we can keep it as a sell on rise sort of scenario where possibly the midcaps may start gaining up because large caps may not find the right footing. On the downside, 5,050 could be the last hope where you can see the momentum possibly may come back. So the expiry could be around 5100 or 5150 levels.