Nifty trade sentiment at ‘Sell on rise’, IT, pharma looking positive; Bank Nifty support near 43000

Nifty trade sentiment at ‘Sell on rise’, IT, pharma looking positive; Bank Nifty support near 43000

By Manojh Vayalar

The August series Nifty futures started with a premium of around 105 points for the current month. For the Nifty futures, FIIs maintained around 41% short positions, higher than the last month’s series, which is now currently around 61% shorts. The index witnessed some short buildup created since the start of this series. We believe, till the time Nifty doesn’t reclaim 19,600 levels, a bounce in the index could be an opportunity to enter into shorts and hence sell on rise is the trade sentiment in Nifty.

FIIs started this series with Long’s position in Index of around 59% vs 41% index shorts, which are currently around 61% shorts as of yesterday. For the Nifty, the IVs for the options stayed at around 12 levels in yesterday’s trade implying a possible short strangle between 19,300 -19,500 strikes. For the Bank Nifty 31st August, 45,000 strike call option has highest open interest implying resistance around 45,000 – 45,300. Bank Nifty has strong support near 43,000 levels. For the Nifty, the VWAP (Volume weighted average price) of Nifty August Futures is around 19,600 implying that to be the resistance. Below this, the Nifty is to be negatively biased for the short term towards 19,200.

With FIIs having higher short positions in the Index, currently higher than the last month, we expect Nifty could continue facing some resistance at the higher levels. The ratio between Bank Nifty and Nifty is currently at 2.26, this ratio has a support at 2.20 and resistance near 2.36. We don’t expect Nifty to outperform as it faces resistance at higher levels. Sector-wise, IT & Pharma look positive in Nifty.

Nifty Long Straddle:

Buy 24th August 19,400 CE@ Rs 110;

Buy 24th August 19,400 PE@ Rs 110;

Net Premium @ Rs 220, SLOSS @ Rs 160;

Target @Rs 300.

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