By Rajesh Palviya
On the weekly chart, the Nifty index formed a long bullish candle however it continued to maintain lower high-low as compared to previous week which signals lack of strength. Since past couple of weeks, the index continue face stiff resistance around “multiple supply zone” of 16800-16850 levels which also coincides with the “bearish gap” (17027-16705) as well as 20 and 200 day SMAs hence going ahead any strong close above 17000 mark may lead fresh upward rally. The chart pattern suggests that if Nifty crosses and sustains above 16800 level it would witness buying which would lead the index towards 17000-17300 levels. However if the index breaks below 16400 level it would witness selling which would take the index towards 16200-16400.
Nifty futures closed at 16647 on a positive note with 3.54% increase in the open interest indicating Long Build Up. FIIs were buyers in index futures to the tune of 428 crore and were sellers in index options to the tune of 109 crore, buyers in the stock futures to the tune of 848 crore. Net Buyers in the derivative segment to the tune of 1256 crore.
India VIX index is at 25.34 v/s 25.4587. Nifty ATM call option IV is currently 23.51 whereas Nifty ATM Put option IV is quoting at 27.30. Index options PCR is at 1.03 v/s 0.88 & F&O Total PCR is at 0.91. Nifty Put options OI distribution shows that 16200 has highest OI concentration followed by 16300 & 16500 which may act as support for current expiry. Nifty Call strike 17000 followed by 16800 witnessed significant OI concentration and may act as resistance for current expiry.
Bank Nifty Outlook
Bank Nifty started the week on a negative note but witnessed buying at lower levels recovered most of the earlier losses which led it close on a flat note. Bank Nifty closed at 34546 with a gain of 138 points on a weekly basis. On the weekly chart the index has formed a bullish candle with shadows on either side indicating indecisiveness amongst participants regarding the direction. The chart pattern suggests that if Bank Nifty crosses and sustains above 35000 level it would witness buying which would lead the index towards 35500-36200 levels. However if index breaks below 33800 level it would witness selling which would take the index towards 33000-32500. For the week, we expect Bank Nifty to trade in the range of 36000-33000 with mixed bias.
Bank Nifty Derivative Outlook
Bank Nifty Put options OI distribution shows that 34500 has highest OI concentration followed by 35000 & 34400 which may act as support for current expiry. Bank Nifty Call strike 35000 followed by 34500 witnessed significant OI concentration and may act as resistance for current expiry.
Sector, stocks to focus
We expect the IT, Pharma, Sugar, Fertilisers, Metal and Chemical sector may do well in the near term. Stocks like Tech Mahindra, Hcl Technologies, Balrampur Chini Mills, Dwarikesh Sugar, GNFC, Chambal, Cipla, Sun Pharma, Maithan Alloy, Jindalsteel & Power, United Spirits may do well in near term.
Nifty50 trading strategy
The strategy which we are suggesting for the week with expiry schedule on 17th March 2022 is IRON BUTTERFLY, which involves Selling of one lot of Nifty 16,650Call @ 218 & Selling of one lot of Nifty 16,650 Put @ 236 and simultaneously buying one lot of 17,100 Call @ 50 & buying one lot of 16,200 put @ 95. Both risk and reward in this strategy are limited and the gains in the strategy will be accrued between two levels i.e 16,950 on upside & 16,350 on downside. The assumption for this strategy is that, Nifty is likely to remain-trade & conclude weekly expiry in the range of 16,950 to 16,350. Maximum profit of Rs 15,500/- will happens if the Nifty closes/expires at 16,650.On the other hand if Nifty expiry close is above 16,959 (upper bep) or below 16,341 (lower bep) then maximum loss incurred will be Rs 7,000/-.
(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)