F&O corner: As Fed outcome may induce volatility, focus on stock opportunity

Ahead of the US Federal Reserve policy decision, benchmark indices rose for the third straight day on December 14 driven higher by buying in IT and metal sectors. NSE flagship Nifty 50 added 52.30 points or 0.28 percent to 18,660 level. Nifty futures traded a premium to 18738.40. Activity was higher in out of the money options. “Markets will react to the outcome of the US Fed meet in early trade on Thursday,” said Ajit Mishra, VP - Technical Research, Religare Broking. “A decisive move above 18,750 in Nifty would further fuel the recovery, else consolidation will resume. Meanwhile, traders should maintain their focus on identifying stocks from the sectors which are trading upbeat.”

The activity was highest in out-of-the-money (OTM) strikes for calls and puts. Overall, 19,000 level and 18500 remained the biggest hurdle and support for the index. However, call writers are gradually shifting to 19100 and 19200 strikes, which shows market expectations for potential upside is gradually getting higher.

Bank Nifty also registered gains. The index rose 0.23 percent to 44,049.10 level. Bank Nifty futures ended the day at 44,145. Activity was largely confined to 44,000 and 44,500 strikes for both OTM and in the money (ITM) strikes.

Vodafone Idea was among the most active stocks on the radar of traders with a long build-up happening in the scrip. A long build-up is a bullish sign that happens when open interest and volume increase with the rise in share price.

RBL Bank, Indiabulls Housing Finance, IDFC First Bank, City Union Bank, Balrampur Chini Mills, GAIL and L&T Tech Services were among others that saw long buildup.

Dalmia Bharat, Jubilant Food, Godrej Properties, Crompton Greaves Consumer, IRCTC, Lupin, ICICI General Insurance and Eicher Motors were others that saw short covering.

The short build-up was seen in Colgate Palmolive, Page Industries, Abbott India, Dabur India, HPCL, Hindustan Aeronautics, ICICI Bank, Marico and Asian Paints. The short build-up is a bearish sign that takes place when the price of a stock falls, along with high open interest and volume.