F&O data suggests momentum likely to continue, Bank Nifty set to outperform Nifty yet again

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Shilpa Rout – Derivatives Lead Analyst at Prabhudas Lilladher

The past week again witnessed a strong upside for the bulls, with the closing session on the last day giving further confirmation that the momentum is likely to continue.

Nifty rolls were seen at 76 percent, which is in line with the previous 3 month average and on weekly expiry Put writing was seen at 17,700 strike, thereby adding more than a lakh contracts, which is the immediate support built up for the index.

Call writers exposure lied at 17,800 to 18,000 strikes, with over a lakh contracts each as well, and which are the immediate targets for the index as well.

Put Call ratio is way above one now, which gives comfort to the bulls. Hence, if Nifty sustains the 17,700 mark, it will see a rally till 18,200, whereas a breach below 17,650 will have it sliding towards 17,200 zone again.

Bank Nifty rolls were seen at 77 percent, which is lower than the previous five month average of 82 percent and on weekly expiry we saw some Put writing at 41,000 strike - with overall 70,000 contracts, thereby hinting at strong support zones for the index now.

Call writers were building resistance at 41,500 again with more than a lakh contracts, followed by 42,000 strike - with overall more than 80,000 contracts and reflecting in the fact that Bank Nifty is all set to outperform Nifty yet again.

FIIs have covered up their short positions and started going long on the indices, which gives the cushion for the markets to cheer up and one can expect a strong rally yet again towards new all-time highs.

India VIX has been in favour of the bulls, staying below 18, and once it tests 14 mark, the sentiment will turn absolutely positive.

Sector Updates

On a weekly basis, we have seen a mixed bag of sectors outstanding rally, with banking, financials, pharma, realty, oil & gas, auto, metals likely to outperform.

Stocks Updates

The long built-up was seen in Maruti Suzuki India, HDFC, IndusInd Bank, Syngene International, Gail India, Reliance Industries, Hindalco Industries, Muthoot Finance, Metropolis Healthcare, JSW Steel, DLF, and Oberoi Realty.

Short built up was seen in technology sector and hence majority of the scrips will see further slide.

Option Strategy

An option strategy well customised for the coming week now would be to play Nifty Long Straddle. A long straddle involves buying of same strike and expiry Call and Put both. It is practised when either one side sharp movement is expected, so that the move reaps high gains on one side premium.

On the weekly expiry, buy Nifty 17,800CE (Call) and 17,800PE (Put). Maximum loss will be incurred if expiry happens between 17,600-17,900 levels whereas profits will start showing up on either side of the range and increase rapidly as the movement catches pace.

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