By Rajesh Palviya
Nifty started the week on a flat note and traded with extreme volatility on either side throughout the week. However Friday’s buying momentum recovered some of the earlier losses to close in negative terrain. Nifty closed at 16049 with a loss of 171 points on a weekly basis. India VIX index is at 17.60 v/s 18.39. Nifty ATM call option IV is currently 14.13 whereas Nifty ATM Put option IV is quoting at 15.41. Nifty Put options OI distribution shows that 16000 has highest OI concentration followed by 15900 & 15800 which may act as support for current expiry.
Nifty Call strike 16500 followed by 16000 witnessed significant OI concentration and may act as resistance for current expiry.
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 16100 level it would witness buying which would lead the index towards 16300-16600 levels.
However if the index breaks below 15800 level it would witness selling which would take the index towards 15600-15400,For the week, we expect Nifty to trade in the range of 16500-15800 with a positive bias. The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.
Bank Nifty Outlook
Bank Nifty started the week on a flat note however profit booking for most of the week led the index to end on a weak note. Bank Nifty closed at 34683 with a loss of 441 points on a weekly basis
On the weekly chart the index has formed a Bearish candle with a long upper shadow indicating selling and resistance at higher levels. Bank Nifty Put options OI distribution shows that 34500 has highest OI concentration followed by 34700 which may act as support for current expiry.
BankNifty Call strike 35000 followed by 34500 witnessed significant OI concentration and may act as resistance for current expiry.
The chart pattern suggests that if Bank Nifty crosses and sustains above 35000 level it would witness buying which would lead the index towards 35400-36000 levels. However if the index breaks below 34300 level it would witness selling which would take the index towards 34000-33500. For the week, we expect Bank Nifty to trade in the range of 35500-34000 with a positive bias. The weekly strength indicator RSI is moving upwards and is quoting above its reference line indicating positive bias.
Sectors, stocks to watch this week
We expect sectors like Automobile, Chemical, Real Estate, Capital Goods & FMCG may show strength this week. Stocks like M&M, TVS Motors, Bajaj Auto, SRF, Nocil, DLF, Godrej Properties, Siemens, ABB India, Hindustan Unilever (HUL), Godrej CP, likely to show a bullish trend this week.
NSE Nifty 50 trading strategy for 21 July F&O expiry
Traders can initiate a Moderately Bullish strategy with reduced premium outflow & lower breakeven point called BULL CALL SPREAD of 21st July Expiry wherein trader can buy one lot of 16,100 call strike @ 100 and simultaneously sell one lot of 16,250 call strike @ 44, so that net outflow or maximum loss will be restricted to up to Rs 2,800. On expiry, if Nifty closes above 16,156 the strategy will start making profit, however, as the risk is limited so is the profit also limited. The maximum gains will be restricted up to Rs 4,700 only because the gains of long 16,100 strike call will be offset by the sold 16,250 strike call if Nifty closes above 16,250 on expiry.
(Rajesh Palviya, Vice President – Research ( Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)