Nifty outlook remains positive; Bank Nifty support placed at 41500, SBI shares may rally till Rs 574

Nifty outlook remains positive; Bank Nifty support placed at 41500, SBI shares may rally till Rs 574

By Manojh Vayalar

This April series Nifty futures started with a premium of 65-70 points for the current month. For the Nifty futures, FII maintained 83% short positions, in line with last month’s series, which is now currently down to 56% short. The index has been witnessing a short covering bounce in the first fortnight of this series, which has now seen the addition of longs at around 17700 levels. We believe that a dip in the index could be an opportunity to enter into longs and hence the Buy on Dips is the trading sentiment in Nifty.

The Bank Nifty has also been witnessing a short covering rally in the first fortnight of this series and has now recently added longs. FIIs started this series with around 81% vs 62% index shorts last month, currently at around 56% as of yesterday. For the Nifty, the IVs for the options stayed at around 11 levels in yesterday’s trade implying possible buying in call options, majorly 17700. For the Bank Nifty 27th April, the 43000 strike call option has the highest open interest implying resistance near these levels. Bank Nifty has strong support near 41500 levels now. For the Nifty, the VWAP (Volume weighted average price) of Nifty April Futures is around 17500 implying that to be the support. Above this, Nifty is to be positively biased for the short term towards 18000.

With FIIs heavily short in the Index gradually decreasing this month, we expect Nifty to perform better and maintain a buy on dips. The ratio between Bank Nifty and Nifty is currently at 2.41, this ratio has support at 2.26 and resistance near 2.35. We do not expect outperformance by Bank Nifty in the short term and suggest maintaining sell on the rise. We expect Nifty to perform better and maintain a buy on dips. Sector-wise, Banks & Auto look positive. SBI with a base at around 552-554 levels can rally till 570-574 in the May series.

(Manojh Vayalar is VP- Derivatives at Religare Broking Ltd. Views expressed are author’s own.)