The Hindu Business Line : Relief rally may go on in Nifty future

As expected, the Nifty January future witnessed considerable intra-day volatility last week almost on every trading day. Besides, turnover also remained low considering it was the settlement week. Though the overall open interest positions witnessed a sharp fall following the heavy declines of the previous week, they clawed back to cross the Rs 1-lakh crore mark. Rollover to February future was about 75 per cent in the case of index futures and about 72 per cent in the case of stock futures.

Follow-up

We had advised investors to consider long positions on the Nifty February futures expecting a relief rally. The Nifty future ended the week in positive territory on a week-on-week basis.

Outlook

The sharp gains on Friday helped sentiment take a turn for the better. However, the Nifty future still remains in bearish zone only. Bullish sentiment may revive only if it moves past the 6350-mark with heightened volumes. The future faces strong support at 5150 and resistance at 5850. The bearish undertone will persist as long as it stays below 5850 level.

Recommendation

The relief rally may continue for the Nifty future and might take it to 5550 initially and then to 5850, which is its resistance level. With the sentiment turning better, investors may consider going long on Nifty February future. However, it could face conisderable volatility before reaching the resistance level.

Risk-averse investors could stay away from the market this week as well.

Implied volatility

Implied volatility (IV) of puts and calls still rules well above 50 per cent mark. Puts IV decreased to 54 per cent (59 per cent) and calls IV rose to 60 per cent (58 per cent). The firmness in volatilities paints a grim picture for day-traders, as market is likely to see persistent volatile trading patterns. Besides, it also means that options are trading rich.

Stock futures

RNRL (Rs 145): Last week, we had advised investors to go short on RNRL. We had expected the stock to touch Rs 95, once it dips below the support level of Rs 135. We had also mentioned the resistance at Rs 179. The stock did not move much from the previous week’s close. We stand by our recommendation as the short- and medium-term trends still point towards a negative outlook on the stock. As advised earlier, investors could hold on to the position until February expiry.

HDFC (Rs 3,000): The sharp run-up on Friday turned the momentum in its favour and the outlook remained positive. Investors could consider going long on the counter, keeping the stop loss at Rs 2,800. The immediate resistance at Rs 3,200 and the possibility of touching the resistance level appears bright.

Satyam Computer (Rs 421): Another stock that turned strong on the charts is Satyam Computer, which moved past its resistance of Rs 400 with comfortable volumes. Investors could consider going long on Satyam Computer February future keeping stop loss at Rs 400. The stock might initially touch Rs 450 level and may even rise to Rs 500.

FIIs trend

Cumulative FII positions as percentage of gross market positions on the derivative segment as on February 1 jumped to 47.93 per cent (41 per cent on January 24). This indicates that FIIs are dominating the F&O segment. FIIs turned net buyers throughout last week, particularly on stock futures. They now hold index futures worth Rs 24,019 crore (Rs 20,038 crore) and stock futures worth Rs 26,970 crore (Rs 35,277 crore).

(The opinions expressed in this column are based on technical analysis. There is risk of loss in trading.)

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