By Ravi Singh

Nifty October futures are currently trading at a premium of 140 points, reflecting strong market sentiment. After experiencing both time and price corrections earlier in the month, the index has recovered and made fresh record highs, now hovering around the crucial 26,000 level. Following the second weekly expiry of this series, there was a significant addition in open interest (OI) in benchmark futures, signalling renewed strength in the market. A fresh support base for Nifty is formed around the 25,500-25,600 range, and traders can hold positional longs with a stop loss of 25,300. From current levels, Nifty is expected to test 26,000, and if momentum sustains, it may gradually rise to 26,200.

On the banking front, the outlook remains positive as long as Bank Nifty trades above the 52,800 mark. Private banking majors have been driving outperformance, and we expect this trend to continue in the coming days. Investors should remain positively biased toward the banking index, as it is well-positioned for further gains.

In terms of FII activity, net long exposure in index futures for the month has ranged between 65%-75%. With solid cash-based buying, FIIs have also purchased INR 31,800 crore worth of index futures in the September series, providing additional support for the market. While the index appears set to inch higher, traders must remain disciplined with stop losses, as FII long exposure is nearing its upper limits, which could introduce volatility.

On the sectoral front, we anticipate continued outperformance from the Banking and Financials, Healthcare, and Realty sectors. These sectors have shown resilience and strength amid the broader market’s upward movement, and they are well-positioned to capitalize on the ongoing positive sentiment.

In summary, both Nifty and Bank Nifty have strong momentum with well-defined support levels, offering attractive opportunities for traders. However, risk management through strict stop losses is key, given the high levels of FII exposure in index futures.

Strategy – Nifty Bull call spread  (26th Sep)
Buy 25950 CE at 99
Sell 26100 CE at 42
Spread 57 Target 100 SL 25

(Disclaimer: Ravi Singh is the Senior Vice President of Retail Research at Religare Broking Limited. Views, recommendations, opinions expressed are personal and do not reflect the official position or policy of Financial Express Online. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)