IGI Logo

Nifty: Sustainability above 14500 crucial for ongoing recovery

* Broader markets witnessed a strong recovery in the settlement week and moved towards 15000 before closing the week just above 14600. Continued buoyancy in metals and short covering move in the banking space led the recent market recovery while the rest of the sectors remained largely subdued. While the Nifty gained almost 2% in the week, the banking index moved up almost 3%. On the other hand, midcaps and small cap stocks found momentum and closed the month near recent highs

* On the rollover front, the Nifty started the new series with almost 9 million shares, which is marginally higher than the last series. However, Bank Nifty OI has declined significantly compared to the last series while the roll spread has declined across the board. We believe after significant volatility in the April series, we may be heading for some consolidation before fresh directional move

* On the options front, the Call base for the weekly as well monthly expiry is highest at 15000 Call strike, which should remain a critical resistance. Since mid-March, the Nifty has remained largely in the range of 14300-14900 while breach of the range should trigger a fresh directional bias. However, on an immediate basis, we believe highest Put base of 14500 may act as support

* Volatility in the markets remained higher near 23 levels last week due to ongoing short covering and closed the week near 23. These levels of volatility suggest a cautious sign. Going ahead, a fresh uptrend should be expected only if volatility index starts subsiding

Bank Nifty: Index likely to consolidate for week

* Broader markets witnessed volatile trade in the April series where for the major part the Bank Nifty underperformed but as sectoral rotation was seen, it attracted money inflow and managed to end the April series well above 32500

* The Bank Nifty started the May series with 1.3 million shares, significantly lower than the last series OI of almost 2.1 million shares. The roll spread in the banking index has also declined sharply to near 100 points as some cool-off was experienced during the settlement trade

* The highest Call base for the coming week is placed at 34000 strike whereas the Put base is at 32000 strike followed by 31500. IVs continued to remain elevated, still near 23% mark due to which option premiums are expensive. Traders are writing OTM options. We believe that short Strangle strategy has been formed for the week, which should keep the Bank Nifty in a range

* We feel stock specific actions could be there for the week where Axis Bank should perform well above 720 whereas from the midcap space, Federal Bank and IDFC First Bank should witness outperformance 

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer