The Hindu Business Line : Rally likely to sustain

The bull momentum continued for the third week in a row and pushed up the Nifty above 5000-mark. The Nifty future closed at 5125.75 against the spot close of 5111.75.

Turnover improved marginally due to the settlement week, due to hectic rollover and squaring-off of positions. Nifty saw a healthy rollover of about 72 per cent in open interest positions while market-wide open interest positions stood at 82 per cent.

The market wide open interest positions increased to Rs 78,266 crore -the highest so far in February 28 - on Thursday, which was the settlement day for April contracts.

This indicates that a few traders, who remained on the sidelines, re-entered in the market as the Nifty displays some signs of resilience.

follow-up

We advised investors to go long on Nifty futures keeping the stop-loss at 4910. For those who followed our recommendation, the strategy would have yielded handsome gains as the Nifty future witnessed a sharp jump.

Outlook

We expect the bull momentum to sustain for the Nifty future, as it broke the crucial resistance at 5100. The next big resistance is placed at 5350 and a move above that could take the Nifty future to 5850 level. The recent sharp recovery has resulted in a positive turn in sentiment. The Nifty future has support at 5050.

A dip below could weaken it to 4950 and then to 4750 levels. However, 5850 remains a crucial level for the Nifty.

Recommendation:

We present the following strategies for our investors:

1) Consider going long on Nifty future with a stop-loss at 5050.

2) Investors could also consider buying the 5100 call, which closed at Rs 168.20 on Friday.

Implied volatility

Implied volatilities for puts decreased to 25 per cent from last week’s levels of 39 per cent, while calls IV declined to 25 per cent (42 per cent). The decrease in implied volatilities indicates a smooth road ahead for the Nifty future.

Put/call ratio

Volume wide put/call ratio increased to 1.35 (0.94) and open interest PCR to 1.39 (1.21).

The increase in volume-wide put/call ratio indicates picking up of traders’ interest.

The increase in open interest put/call ratio suggests that traders kept their puts positions open as a hedge against their long positions in Nifty future market.

Stock futures

Follow-up

Reliance Petro: We recommended that investors go short on the counter if dips below 180. The situation, however, does not arise, as the stock remained firm. We still stand by our recommendation and if the stock falls below 180, it could weaken to 165 levels.

ICICI Bank (915.65): The stock is at a crucial stage. While a move past 930 could take it to 1025, a fall below 878 may weaken the stock to a low of 804-805 and then to 770. We expect the stock to maintain current bull run.

Investors may consider going long on the stock keeping (once it moves past 930) with a stop loss at 930.

FIIs trend

The cumulative FII positions as a percentage of gross market positions on the derivative segment as on April 24 is 46.75 per cent.

FIIs had increased their exposure in the F&O market through steady buying in the week.

Their net buying mainly was in index options. They now hold index futures worth Rs 24,154.91 crore (Rs 19,984.64 crore) and stock futures worth Rs 21,360.48 crore (Rs 20,035.16 crore).

The increase in open interest positions indicates that they have turned positive.

More Stories on : Derivatives Markets | Stock Markets | F & O Outlook

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page