The long-term outlook for the Bank Nifty (15,500) remains positive. If the index manages to sustain above 14,200, it can move past 17,000 levels. The bullish outlook will reverse only if the Bank Nifty falls below 12,815. In such a scenario, it can also test 11,200 levels.

F&O pointers: Bank Nifty July futures added fresh long positions on Friday. Option trading presents a positive bias, but indicates 15,300 as a crucial level. On the other hand, heavy accumulation in the 16,000 call indicates resistance at that level.

The event: The maiden Budget of the Narendra Modi Government will be presented on July 10 by Finance Minister Arun Jaitley. There is already a big expectation from the market.

Scenarios: a) If the Budget manages to surprise positively, then the Bank Nifty will surge sharply; b) If the Budget just meets expectations, then the Bank Nifty may slip immediately but then move in a range after the initial reaction; and c) if the Budget fails to meet broad expectations, then the Bank Nifty can test its key support levels.

Strategy: Traders can consider a long strangle on the Bank Nifty by buying 16,000 call and 15,000 put, which closed on Friday at ₹316 and ₹216, respectively. Profit in this strategy will be unlimited if Bank Nifty swings in either directions. As the market lot is 25, the total outgo would be around ₹13,300. This will be the maximum loss, incurred if the Bank Nifty settles between the strike prices at the time of expiry.

On the other hand, a close above 16,650 or below 14,350 will yield positive results. Given the expectations, built around the Budget, there is a high probability for the Bank Nifty to hit either levels.

Related Topics
comment COMMENT NOW