The June series has seen Nifty trading in a tight range of 5400-5600 in the first two weeks. A lack of directional move has caused IVs (implied volatilities) to remain low. However, all this may change quickly in the coming trading sessions, as advance tax numbers and the RBI Monetary Policy with a fragile global environment backdrop may cause the Nifty to move out of this trading range.
Technically, Nifty is currently seen in a corrective phase and is retracing its upmove from 5328-5600 levels. Strong support for this corrective move is placed in the 5400-5430 region. Once this corrective move is over, we may expect the index to retest the 5600 mark. Only a close above the 5600 mark, backed with strong volumes, will warrant a revision of target upwards to 5700-5730 levels. The bullish bias will be negated if the Nifty breaks below 5400 level. Options build-up in Nifty suggests a slightly negative undertone, with OTM put strikes of 5000-5200, which has a substantial build up of over five million shares each, showing no signs of closure. A part of the positions can be explained by hedging of long positions by positional players, but even after adjusting for the same, the OI in the OTM Put options still remains elevated.
Domestic news flows are negative with the latest WPI inflation figure coming at 9.1 versus 8.7 for April 2011. With the impending advance tax numbers and monetary policy announcement in the coming two trading sessions, any negative announcements can push Nifty to test its important support levels. Globally, the scenario remains fragile with the US market near its March lows, Greece sovereign debt crises still at elevated levels and China raising its cash reserve ratio by half a percentage point to tame inflation.
Sectorally, the pharma space, despite the widespread volatility in the recent market movement, has remained resilient. The first leg of the rally has seen strong participation from large-cap pharma stocks like Ranbaxy, Sun Pharma and Cipla. The second leg of this rally may involve larger participation from the mid-cap pharma stocks like Biocon, Natco Pharma and Glenmark Pharma . In the banking space, a directional move is expected only post the RBI Monetary Policy announcement. The metal space has remained weak and has added fresh shorts. Stocks like Tata Steel and Hindalco have seen fresh shorts in the 580 call and 190 call strikes, respectively. Reliance 900 put has the highest OI and the stock is likely to find support at this level. Considering, the upcoming events we expect Nifty to display a directional move on the back of increased IVs in the next few trading sessions.
(The author is Vice-president-Active Trader Service, ICICI Securities)
Technically, Nifty is currently seen in a corrective phase and is retracing its upmove from 5328-5600 levels. Strong support for this corrective move is placed in the 5400-5430 region. Once this corrective move is over, we may expect the index to retest the 5600 mark. Only a close above the 5600 mark, backed with strong volumes, will warrant a revision of target upwards to 5700-5730 levels. The bullish bias will be negated if the Nifty breaks below 5400 level. Options build-up in Nifty suggests a slightly negative undertone, with OTM put strikes of 5000-5200, which has a substantial build up of over five million shares each, showing no signs of closure. A part of the positions can be explained by hedging of long positions by positional players, but even after adjusting for the same, the OI in the OTM Put options still remains elevated.
Domestic news flows are negative with the latest WPI inflation figure coming at 9.1 versus 8.7 for April 2011. With the impending advance tax numbers and monetary policy announcement in the coming two trading sessions, any negative announcements can push Nifty to test its important support levels. Globally, the scenario remains fragile with the US market near its March lows, Greece sovereign debt crises still at elevated levels and China raising its cash reserve ratio by half a percentage point to tame inflation.
Sectorally, the pharma space, despite the widespread volatility in the recent market movement, has remained resilient. The first leg of the rally has seen strong participation from large-cap pharma stocks like Ranbaxy, Sun Pharma and Cipla. The second leg of this rally may involve larger participation from the mid-cap pharma stocks like Biocon, Natco Pharma and Glenmark Pharma . In the banking space, a directional move is expected only post the RBI Monetary Policy announcement. The metal space has remained weak and has added fresh shorts. Stocks like Tata Steel and Hindalco have seen fresh shorts in the 580 call and 190 call strikes, respectively. Reliance 900 put has the highest OI and the stock is likely to find support at this level. Considering, the upcoming events we expect Nifty to display a directional move on the back of increased IVs in the next few trading sessions.
(The author is Vice-president-Active Trader Service, ICICI Securities)
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