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Nifty: Positive bias remains with support near 17400...

* Indian markets continued to outperform the rest of the world and made fresh lifetime highs near 17800 during the week before closing near 17585 as some profit booking was observed from highs on Friday with gains over 1%. After a range bound last month, banking index showed outperformance and led the market momentum. Along with it, underperforming stocks also exhibited a fresh up move

* On the data front, the current up move has put Call writers on the block and positions were moved to deep OTM strikes towards 18000. Despite significant writing at ATM and OTM Call strikes on Friday, we believe till major Put bases are not breached, one should remain positive. During the last couple of weeks, Put writers continued to strengthen the base. For the coming weekly settlement, 17400 holds noteworthy open interest

* On the volatility front, India VIX has moved to its highest levels in more than three months and closed above 15 levels. While the market remains in an uptrend, such a sharp rise in volatility ahead of FOMC meet next week may induce some profit booking in the coming sessions. Hence, we advise to hold long positions above 17400 levels

* Sectorally, we believe banking would remained the major leader in the coming sessions while technology stocks may see further consolidation after significant outperformance of the last couple of months. At the same time, metals may come under pressure due to liquidation of positions

Bank Nifty: Outperformance in banking stocks should take index towards 39000…

* The Bank Nifty managed to outperform last week as it closed at new lifetime highs. Private banks along with the PSU pack did well where Kotak Mahindra Bank and IndusInd Bank outperformed. Axis Bank managed to close near its highest Call base indicating more upsides in coming days

* Last Friday we saw sharp reversal happening from higher levels due to which the volatility index moved to three months high and closed above 15%. We feel volatility would continue to rise in coming days due to which the trading range would increase in indices and sharp moves being expected on both sides

* Due to high volatility, the option OI is placed from 36500 to 38500 strikes. However, major Put OI writing observed in 37000 strike followed by 37500. On upsides, we feel the Bank Nifty is likely to head towards 39000 as money flow is likely to seen from IT and metals to banking

* The current price ratio of Bank Nifty/Nifty has reverted from its yearly low. We feel the outperformance in banking stocks should continue for a couple more days

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