Published on 22/09/2020 11:00:33 AM | Source: ICICI Direct

Nifty likely to consolidate around 11500 in expiry week - ICICI Direct

Posted in Market Outlook| #Market Outlook #ICICI Direct

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Nifty likely to consolidate around 11500 in expiry week

* The positive bias prevailed in the Nifty last week where it managed to test 11600. However, due to profit booking in a few heavyweights at higher levels, the Nifty could not hold on to its gains

* Reliance Industries remained muted whereas selling was seen in metals, FMCG, HDFC Ltd and banking stocks. IT, auto and pharma continue to do well, which provided a cushion to the index at lower levels

* After a long time, the Nifty saw above average additions in ATM Straddle (11500 Call & Put) for the main expiry week. The combined premium for this straddle is near 200 whereas IVs continued to decline and slipped below 20 levels last week. We feel the index would consolidate for a few sessions with strong support for the week pegged at 11300

* Volatility is expected to be high this week due to rollovers while major trigger in stocks would be based on the quantum of rollover. However, the overall bias for the index remains positive until it holds 11300. We feel pharma, IT, select metals and capital goods would do well in this consolidation


Bank Nifty has strong support at 22000...

* In the current leg of consolidation, the Bank Nifty continued to remain a laggard as it failed to find any sustainable momentum despite most private banks being near their support and highest Put base for the September expiry at 22000 levels

* A sharp sell-off was seen on the last day of the week due to which the Bank Nifty slipped below 22000. However, towards the end, on the back of OTM Put writing, the index managed to close well above 22000 along with a rise in premium over spot

* IVs continued to remain choppy despite sharp whipsaws last week whereas major OI concentration for the week was seen at 22000 Put strike, which is very important for the Bank Nifty. We feel a sell-off could be seen only if the index manages to close below 22000

* On the last day of the week, the rupee also saw huge volatility. However, the major Call OI writing is at 74 strike Call, which is the hurdle zone. We feel the rupee would continue to appreciate, which will provide a sentimental boost to BFSI


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