The short-term outlook has turned negative for the stock of SRF (₹2,503.45). It finds an immediate support at ₹2,362. A close below this will trigger further fall that can take it towards ₹2,116. The long-term outlook will be positive as long as SRF stays above ₹2,072. Yet, we expect the stock to come under pressure in the short term.
F&O pointers: SRF saw a rollover of short positions to October series. However, SRF futures at ₹2,510.05 trades at a premium over the spot price of ₹2,503.45. Option trading indicates that SRF can move between ₹2,400 and ₹2,800.
Strategy: We advise traders to consider a bear-put spread strategy which can be constructed by selling 2450-put (₹75.55) and simultaneously buying 2500-put (₹97.60), which will cost traders ₹8,268.75. This would be the maximum loss one can suffer and that will happen if SRF stays at or above ₹2,500. On the other hand, a profit of ₹10,481.25 is possible if the stock slips below ₹2,450. Traders could consider entering the position with net premium outflow between ₹8,500 and ₹8,750 based on the opening price of SRF on Monday.
Alternatively, high-risk traders could consider going short on SRF futures with an initial stop-loss at ₹2,543.55. The stop-loss can be shifted to ₹2,530 once the futures dip to ₹2,493. Investors can book profits at ₹2,424. This strategy is strictly for traders who understand the risks that come from wild swings, if there are any.
Follow-up: As advised last week, investors can consider holding 7300-put of Bajaj Auto for two more weeks.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.