By Manojh Vayalar
This December series started on an optimistic tone for both the Nifty and Bank Nifty and then eventually the Index witnessed profit booking. The positioning in the Nifty futures peaked at around 1.25 crore Open interest and now with profit-booking, it has dipped to around 1 crore. Generally, a lower positioning brings in range-bound movement. We expect Nifty to be in the 18200 – 18600 range for the major part of the contract.
FIIs started this series with around 77% Index longs, with some volatility they are down at 59 % as of today. For Bank Nifty, the IVs for the options rose from 13.5% to 14.5% in yesterday’s trade implying buying in options in Bank Nifty, and we believe it might be major Call Options. So, Bank Nifty remains in ‘Buy-on-Dips’ with strong support at 42800 and resistance near 44000. The Nifty the VWAP (Volume weighted average price) of Nifty December is around 18250 implying that to be the support for these longs.
The ratio between Bank Nifty and Nifty is currently at 2.36, this ratio has support at 2.31 and resistance near 2.42. We expect outperformance by the Bank Nifty in this series. Every time the Bank stocks lead the rally, the trend has strength and we expect Nifty might rally beyond 18600 only if the participation exceeds 1.2 crore in Open interest which does not seem the case now and the VIX remains in 13-15% range.
Sector-wise, Banks, and FMCG look positive. However IT, Metals and Pharma might witness pressure. Britannia has seen a huge long buildup in the last 2 sessions, and we believe that 4650 might be the target with support at 4420 for the stock. Axis Bank has witnessed a huge derivative-based buying of around 6% open interest. We expect the stock to rally to 960, the support is around 928 in this series. Tata Motors with a base at around 411 levels can rally to 440 in this series.
(Manojh Vayalar is VP – Derivatives Research, Religare Broking. The views expressed are the author’s own. Please consult your financial advisor before investing)