Key resistance for Nifty at 6020-6040: Aditya Birla Money

In an interview to CNBC-TV18, Hemant Thukral of Aditya Birla Money spoke about the outlook for the F&O market.

Below is a verbatim transcript of the interview: Q: Quite a bit of action in your part of the market, how would you approach the Nifty today in trade? A: On Thursday, foreign institutional investors (FIIs) had bought huge amount of index options upto the tune of Rs 1,400 crore. Basically because volatility index (VIX) had given virtually a breakout above that 18.40 levels. On Friday, they have sold the same amount of index options in an equal pace that means they have sold Rs 1,440 crore of index options and with VIX fourth time in a row in last three months, failing to sustain above 18. Though this is a slightly technical point, this makes me feel that the market may now consolidate in this range for at least till this expiry. So I am taking a slightly larger call. From Monday to Thursday i.e. the whole expiry week, I do not expect the market to break below that 5,930-5,950. On the upside also, market will face huge resistance to cross that 6,020-6,040 level. Therefore, for traders, I would recommend a calendar spread i.e. you can sell the current month May Put, which closed around Rs 56-57 levels on Friday and buy a June 6,000 Put which closed around Rs 121-122. If market closes within this range i.e. between that 5,950 and 6,021, the traders can make some good profit from the strategy. I have a feeling that we have to see some more consolidation at least for two-three sessions before this other side range is broken. Q: You have picked JSW Steel from the metal space today? A: The metals have picked up on Friday both on the rollover front as well as on the open interest (OI) additions. So clearly Tata Steel and JSW Steel both are trying to see some buying from lower levels. Especially JSW Steel has added 7 percent on the OI front and also has managed technically to cross that Rs 700 mark, which was acting as a stiff resistance. So for me, if today it sustains above Rs 700, it becomes a very good buying candidate. In immediate short-term you can expect the stock to race up to Rs 740-745. I will keep a stop loss around Rs 670-665 range where the stock has formed a strong support zone. However, among the metal pack, I prefer JSW Steel over Tata Steel just because it has seen more fresh OI on the long side built up. Q: You have a trading strategy on LIC Housing Finance, how are you playing that? A: Both the housing finance major companies, HDFC and LIC Housing Finance, have started showing good signs of rolling cost moving to the next series. Even though the rollovers are slightly below average, the rollover cost is very encouraging. LIC Housing Finance saw big short covering coming in on Friday and if you see the OI data, I feel that after another 5-6 percent, there is more short position, which can get covered today. The reason is that technically it has bounced back from taking support from 20 days moving average (DMA) itself i.e. around Rs 265-270 zone. In a short-term period, I expect LIC Housing Finance to retest that Rs 290-295 zone, which was a stiff resistance zone for it. I will keep a stop loss of Rs 270 for today’s trade. Q: What kind of positions are you seeing on Bank Nifty because that is the one that lost nearly 4 percent last week? A: Surprisingly, in Bank Nifty in last three days we have not seen any major shorts coming in. It was more long unwinding position. If you see Bank Nifty as an index per se, it has seen week-on-week basis 22 percent OI declining. So clearly a lot of people have booked profits. On the levels front, technically, it has managed to hold 12,500. To show any run on the upside or to show that more rally can be sustained, it has to cross that 12,850 barrier, which was acting as a strong support and now will act as a resistance for it. So, Bank Nifty becomes interesting if it crosses 12,850 and no major short positions seen in this sector. I feel it will be more or less like Nifty, 12,500 on the downside and 12,850 on the upside. That can be a consolidation range for one-two sessions.