Nifty to trade in 17400-18400, analyst says use Call Ladder strategy; Bank Nifty looks positive, SBI top bet

Nifty to trade in 17400-18400, analyst says use Call Ladder strategy; Bank Nifty looks positive, SBI top bet

By Rajesh Palviya

Nifty started the week on a positive note and traded with extreme volatility on either side for most part of the week, however buying momentum at lower levels pulled the index higher to close on a flat note. Nifty closed at 17784 with a gain of 114 points on a weekly basis. On the weekly chart the index has formed a “Doji” candlestick formation indicating indecisiveness amongst market participants regarding the direction. The chart pattern suggests that if Nifty crosses and sustains above 17900 level it would witness buying which would lead the index towards 18100-18400 levels.

Nifty Derivative Outlook

Nifty futures closed at 17879 on a positive note with 0.95% decrease in the open interest indicating Short Covering. FII’s were Buyers in Index Futures to the tune of 164 crores and were Buyers in Index Options to the tune of 3105 crores, Sellers in the Stock Futures to the tune of 1371 crores. Net Buyers in the derivative segment to the tune of 1707 crores.

India VIX index is at 17.69 v/s 19.00. Nifty ATM call option IV is currently 17.91 whereas Nifty ATM Put option IV is quoting at 14.12. Index options PCR is at 1.19 v/s 0.79 & F&O Total PCR is at 0.80. Nifty Put options OI distribution shows that 17800 has highest OI concentration followed by 17700 & 17500 which may act as support for current expiry. Nifty Call strike 18000 followed by 17900 witnessed significant OI concentration and may act as resistance for current expiry.

Bank Nifty Outlook

Bank Nifty started the week on a positive note and traded with extreme volatility on either side for most part of the week, however buying momentum at lower levels pulled the index higher to close at 37752 with a gain of 604 points on a weekly basis. On the weekly chart the index has formed a “Doji” candlestick formation indicating indecisiveness amongst market participants regarding the direction. The chart pattern suggests that if Bank Nifty crosses and sustains above 38100 level it would witness buying which would lead the index towards 38500-39300 levels. However if index breaks below 37300 level it would witness selling which would take the index towards 37000-36500. Bank Nifty is trading above 20, 50, and 100 day SMAs which indicates positive bias in the short to medium term.

Bank Nifty Derivative Outlook

Bank Nifty closed at 37985 on positive note with 4.63% increase in open interest indicating Long Build Up. BankNifty Futures closed at a premium of 26 points compared to the previous day premium of 10 points. Bank Nifty Put options OI distribution shows that 37500 has highest OI concentration followed by 38000 & 37700 which may act as support for current expiry. Bank Nifty Call strike 38000 followed by 37500 witnessed significant OI concentration and may act as resistance for current expiry.

Sectors and stocks for coming weeks

We expect sectors like PSU Banks, Cement, Metal, Real Estate, Defence, Sugar, FMCG, Chemical and Fertilizers to do well in the coming week. One can focus on stocks like State Bank of India (SBI), Bank of Baroda, Ambuja Cements, Vedanta, SAIL, DLF, Balrampur Chini Mills, Gujarat Alkalies & Chemicals, Laxmi Organics , Chambal Fertilisers Chemicals, ITC, Hindustan Unilever, BEL can do well in coming week.

Nifty 50 trading strategy for this holiday-shortened week:

The strategy which we are suggesting for this weekly expiry dated 13th April is a Moderately Bullish strategy called as Call Ladder, which involves buying of one lot of Nifty 17,850 Call @ 120 & selling of one lot each of 18,000 Call @ 60 & one lot of 18,150 Call @ 27. The cost of the strategy involves outflow of Rs 1650 which is the maximum loss if Nifty trades & remains below 17,880 levels on expiry. The maximum profit of Rs 5,850 will be attained at 18,000 levels, while strategy will start making loss above 18,250, hence it’s advisable to exit the strategy in total to avoid UNLIMITED losses above 18,250. Break Even points of the strategy are 17,883 on Upside & 18,267 on the lower side.

(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)