November Nifty Futures signal ‘Buy on Dips’ strategy as FIIs trim short positions

November Nifty Futures signal ‘Buy on Dips’ strategy as FIIs trim short positionsBy Manojh Vayalar

The November series Nifty futures started with a premium of around 70 points for the current month.The Nifty has rolled around 83% and Bank Nifty around 79%.For the Indexfutures, FII have reduced the short positions to 80% from 89%.

The Index is now in a ‘Buy on Dips’ mode till 19500 is not breached on closing basis, for the expiry. 19550-19600 might be the immediate support and only a decisive close below it might bring in further downside. 19900 might be the first target that the index would look to achieve.

FIIs started this November series with Short position in Index futures of around 89% vs 70% last month, which are currently around 80% shorts. For the Nifty, the IVs for the options remained around 12 levels in yesterday’s trade. For the Bank Nifty 30thNovember, 44000 strike Call option has huge open interest implyingresistance at around 44000 above which the Bank Nifty might witness further momentum towards 45000 as FII’s further cover their shorts. For the Nifty, the VWAP (Volume weighted average price) of Nifty November Futures is around 19550 implying that to be the support. Above this, Nifty is to be positively biased for the short term towards 19900.

With FIIs reducing their short positions majorly as short covering, we expect Nifty to be range bound with positive bias.The ratio between Bank Nifty and Nifty is currently at 2.21, this ratio has a support at 2.20 and resistance near 2.28. We expect Bank Nifty to outperform the Nifty back towards 2.28.

Sector-wise, IT, Pharma, Autos & FMCG look good in Nifty. Though Bank Nifty has underperformed Nifty, we feel this might change and now Bank Nifty might start outperforming Nifty and give strength in this pull back to Nifty.

Nifty Long strangle:-Buy Nifty 30 NOV 19700 CE @ 180-200, stop loss at 120, target 300.

(Manojh Vayalar, VP-Derivatives, Religare Broking Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)