By Ravi Singh

Nifty October futures are currently trading at a 200-point premium. After reaching record highs, the index has entered an extended profit-taking phase, largely driven by significant FII selling in the cash segment, amounting to nearly Rs 39,000 crore this month. This selling pressure has resulted in a sharp drop in FII long exposure, now down from 80% to 47%. The 24,800 level is crucial support; if it breaks; further downside towards 24,500 is possible. Additionally, Nifty’s Put-Call Ratio (PCR) has reached oversold levels at 0.69, suggesting a potential for a bounce. It is advisable to avoid fresh shorts at the current level while existing shorts can be held with a stop loss at 25,100. From a positional perspective, the trend remains negative as long as Nifty trades below 25,500.

For the banking sector, the 50,000-49,800 range is a critical support zone to monitor closely. Initiating fresh shorts at current levels is not recommended; instead, it’s prudent to wait for a significant bounce around the 51,300-51,800 area before considering new short positions. The banking index is likely to remain under pressure as long as it trades below 52,300. Similar to Nifty, Bank Nifty’s Put-Call Ratio (PCR) is at an oversold level of 0.64, suggesting a potential for some bounce or consolidation over the next few trading sessions.

On the sectoral side, the pharma and IT sectors appear to offer some stability in the current market environment. To summarize, it’s essential to adhere to the specified levels and avoid initiating fresh short positions. Waiting for a substantial bounce before entering short trades is advisable for now.

Strategy – Nifty Short strangle (10th Oct)

Sell 24550 PE at 57

Sell 25250 CE at 43

Spread 98-100 TGT 30 SL 140

(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.)