The Hindu Business Line : Range-bound movement seen in Nifty future

There was no let up from bear hammering last week, as the Nifty October future finished at 3998.15, registering a fall of 6.4 per cent over its last week’s close.

The expiry of September series saw a rollover of 57 per cent (into October series) in Nifty futures and 69 per cent for the overall market-wide positions.

These figures are abysmally low compared with the historical rollover percentage. The premium of Nifty October future, which was about 41 points last week, has now narrowed down to about 13 points, indicating that there could have been accumulation of fresh short positions.

Follow-up

We had presented two strategies on Nifty:

1) Going short on Nifty future with a stop-loss at 4450; and 2) Short straddle by selling the Nifty 4300 call and put.

While the first strategy would have yielded handsome profits for traders, the latter would be out of money. Traders can consider holding this position as we expect a range-bound movement for some more time.

2) DLF: We had advised investors to go short in DLF keeping the stop-loss at 475 with a target of 370; this strategy would have resulted in windfall profits.

Outlook

As has been written in this column previously, Nifty future continues to face a strong resistance around 4450 level and a strong support at 3800-50 levels.

The coming week, Nifty future may begin with a downward bias and touch its support level.

A dip below this support can weaken it further to 3525 levels.

However, before that it faces minor support at 3765 level. Alternately, a move above 4100 can lift the Nifty future up to 4330 levels. That said, we expect the Nifty future to remain range-bound, moving between 3850-4250 levels.

Recommendation

Coming up with a derivative strategy in the present market conditions is not very easy; the best advice would be to stay away from trading if you think your risk-appetite cannot match pace with the market volatility.

However, traders with higher risk appetite can consider the following strategies, but with a strict stop-loss.

1) Going short on Nifty future (only) if it dips below 3950, with a stop-loss at 3980.

2) Going long on Nifty future if it moves past 4095, with a stop-loss at 4000.

Stock futures

SBI 1435

We present a negative outlook on the stock. While it faces resistance at1510, the stock finds support at 1315 level. A dip from this support can even take the stock to 1265 level.

We suggest traders to go short on SBI October futures, with a stop-loss at 1475. Risk-averse traders can stay away from this strategy as the stop-loss has been placed at wider range.

FIIs trend

The cumulative FII positions as percentage of the total gross market position in the derivative segment as on September 25 was 38.39 per cent. This once again indicates the higher level participation of local traders, particularly proprietary segment.

Foreign institutional investors have been offloading quite heavily, particularly index futures throughout last week.

They now hold index futures worth Rs 8,969.7 crore (Rs 15,191.58 crore) and stock futures worth Rs 14,583.04 crore (Rs 21,852.1 crore). Their holding on index options stood at Rs 16,303.8 crore (Rs 24,576.07 crore), according to the latest NSE data.

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