Moneycontrol Be a Pro
Get App
Last Updated : Jul 29, 2017 09:36 AM IST | Source: Moneycontrol.com

RBI policy a key trigger for Nifty to hold 10,000 next week; support seen at 9,850

Looking at the options build of August series, levels of 10,000 will remain important and sustainability above these levels is important for any further up move. In this scenario, some consolidation below 10000 levels is expected.


By Amit Gupta

ICICIdirect

The open interest in Nifty futures at 16.5 million shares is lowest seen since January 2017 despite having one of the highest roll spread since November 2016 suggesting closure of positions during the settlement.

The effective premium in Nifty is close to 44 points (excluding dividend of 13 points in the August series) is also on the higher side primarily due to lack of short rollover.

Close

Historically, high Nifty premium does not bode well for the markets but looking at the long series and Nifty trading near 10,000 levels, current premium can’t be justified.

Looking at the options build of August series, levels of 10,000 will remain important and sustainability above these levels is important for any further up move. In this scenario, some consolidation below 10000 levels is expected.

Nifty has started the August series near their highest Call base. While the July up move can be largely attributed to the short covering among heavyweights due to P-Note ban, a continuation of the momentum will require some fresh triggers.

Until that happens a round of profit booking can be expected from its highest Call base.

In the current consolidation, underperforming sectors have started performing on the back of short covering. This pattern is likely to continue in coming weeks.

In the case of profit booking in the outperforming spaces, underperforming stocks could take the lead limiting the market declines.

RBI Policy can be a key trigger:

After surpassing the highest Call base of 25000, the BankNifty ended the July series expiry on an optimistic note with lower rollover as compared with 3month roll average as most of the short positions left to settle on July expiry.

Stocks like HDFC bank and Axis Bank performed well whereas PSU and other mid-cap banks also supported the up move.

BankNifty has started the August series with higher open interest base as compared with the July series. The long open interest build-up was seen in HDFC bank along with Axis Bank.

As the index saw reversal from 25000 levels, we might see profit booking in these stocks, which is likely to keep the index up move in check.

We might see higher volatility as the RBI Monetary policy is lined up in the upcoming week. However, looking at the options data, we feel the selling in likely seize around 24500 as huge writing is seen in 24500 strikes Put.

The premium fell nearly 20 percent despite the index ended in negative territory in Friday’s session. Nifty Bank options build-up for August series.

The price performance trend (Nifty Bank/ Nifty) has moved towards 2.49 levels. We feel a leg of profit booking is due which could push price ratio towards 2.47 levels. However, RBI policy reaction will be the key for direction.

Decline in dollar lifted sentiment

The decline of the dollar to a 12-month low has further lifted animal spirits of EMs, with MSCI on track to post strongest monthly gain since March 2016.

Latest FOMC verdict and its concerns of lowering inflation below the targeted level of 2 percent is likely to keep rate hike expectation and dollar subdued.

This will further push appreciation trend of EM currencies that have appreciated by 7 percent since US Presidential election.

Thus even if the RBI acts on the rate in its upcoming policy, the Indian Rupee is likely to weather out any depreciation bout and keep the positive sentiment on Indian equity and Debt segment.

Disclaimer: The author is Head of Derivative from ICICIdirect. The views and investment tips expressed by investment experts 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.

The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .
First Published on Jul 29, 2017 09:36 am
Loading...
Sections
Follow us on
Available On
PCI DSS Compliant