Derivatives Strategy – Covered Call : Buy Canara Bank For Target Of Rs. 175 By ICICI Direct
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Rationale
* For a couple of sessions, the Bank Nifty has been relatively outperforming the Nifty where buying is clearly visible in most private banks. However, after sell-off from recent high, fresh buying interest has emerged in most PSU banks
* Canara Bank, in particular, consolidated in the recent sell-off and largely found support near | 155 levels along with delivery based volumes
* Closure is visible in OTM Calls, which is the positive sign as we feel Call closure activity has started that will pull stock higher
* The IV-spread of Canara Bank-Nifty is hovering below its mean level. We feel that on the back of closure in Call writing positions, this spread would move higher towards its Mean + 2 Sigma levels
* As the Bank Nifty made a new life-time high we feel stocks from the PSU banking pack are likely to do well and Beta could be expected in Canara Bank
Buy Canara Bank Ltd @ 160.5-162.5 TGT 175 SL 149.5
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