The stock of Life Insurance of Corporation of India (LICI) (₹957.70) is ruling at a crucial level. Important resistance is at ₹971. A conclusive close above this will trigger a fresh rally to ₹1,079.
Nearest supports are at ₹908 and ₹730. A close below the latter will change outlook to negative. That said, we expect LICI to sustain the gains.
F&O pointers: LICI July futures closed at ₹952.95 against the spot price of ₹957.70. The discount is mainly on account of dividend (₹12) for which the record date is July 25. The counter has witnessed a steady build up in open interest in the last few weeks. From around 4.98 lakh shares on June 2, open interests jumped to 66.52 lakh shares on June 27, denoting good interest from the participants.
Strategy: Consider buying the 960-strike call of LICI, whose premium stood at ₹21.80 on Friday. As the market lot is 700 shares, this would cost ₹15,260. This is the maximum loss in this trade and that will happen if the stock closes below ₹960 on expiry.
If LICI surges sharply this month, the trade can garner considerable profits. Hold the position with an initial stop-loss at ₹12. Shift this to ₹20, if LICI opens the week on a strong note. Target can be ₹28. Traders with higher risk appetite can aim for a higher target of ₹ 35.
Follow-up: Hold the long position on July 650-call on Hindalco Industries. Exit at ₹58.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.