By Rajesh Palviya
On the weekly chart, the NSE Nifty 50 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 17500 level it would witness buying which would lead the index towards 17800-18000 levels. However if index breaks below 17000 level it would witness selling which would take the index towards 16800-16500. For the week, we expect Nifty to trade in the range of 17500-16500 with mixed bias. The daily and weekly strength indicator RSI is moving downwards and is quoting below its reference line indicating negative bias.
Nifty futures closed at 17178 on a negative note with 8.14% decrease in the open interest indicating Long Unwinding. Nifty Futures closed at a premium of 6 points compared to the previous day premium of 18 points. FIIs’ were sellers in index futures to the tune of 941 crore and were buyers in index options to the tune of 1801 crore, sellers in the stock futures to the tune of 1186 crore. Net Sellers in the derivative segment to the tune of 196 crore.
India VIX index is at 18.35 v/s 17.85. Nifty ATM call option IV is currently 16.19 whereas Nifty ATM Put option IV is quoting at 17.53. Index options PCR is at 0.91 v/s 1.14 & F&O Total PCR is at 0.87. Nifty Put options OI distribution shows that 17000 has highest OI concentration followed by 17200 which may act as support for current expiry. Nifty Call strike 17500 followed by 17300 witnessed significant OI concentration and may act as resistance for current expiry.
Bank Nifty Outlook
On the weekly chart, the Bank Nifty index has formed a sizable bearish candle forming lower High-Low as compared to previous week and has closed below the same indicating weakness . The chart pattern suggests that if Bank Nifty crosses and sustains above 36500 levels it would witness buying which would lead the index towards 37000-37500 levels.
However if the index breaks below 35900 level it would witness selling which would take the index towards 35500-35000. Bank Nifty is trading below 20, 50, 100 and 200 day SMA which are important short term moving averages, indicating negative bias in the short to medium term. For the week, we expect Bank Nifty to trade in the range of 37000-35000 with a negative bias.
Bank Nifty Derivative Outlook
Bank Nifty closed at 36094 on negative note with 0.02% increase in open interest indicating Short Build Up. Bank Nifty Futures closed at a premium of 49 points compared to the previous day premium of 114 points. Bank Nifty Put options OI distribution shows that 36000 has highest OI concentration followed by 36500 & 35700 which may act as support for current expiry. Bank Nifty Call strike 36500 followed by 36000 witnessed significant OI concentration and may act as resistance for current expiry.
Sectors, stocks in focus this week
We expect the Sugar, Fertiliser, Textile and FMCG sector may show strength while banking, IT, Metal may remain in consolidation. One needs to focus on stock specific action. Some stocks like Apollo Hospitals Enterprise , J.B.Chemicals & Pharmaceuticals, Jubilant FoodWorks, Petronet LNG, Marico, United Spirits, Shree Renuka Sugars, etc.
NSE Nifty 50 trading strategy for this expiry week
On concerns about risks from interest rate hikes in tandem with global peers Nifty is likely to have a gap down opening and traders can initiate a Moderately Bearish strategy with reduced premium outflow & lower breakeven point called Debit Put Spread or Put Spread for 28th April Expiry wherein trader will buy one lot of 17,100 Put strike @ 112 and simultaneously sell one lot of 16,800 Put strike @ 40, so that net outflow or maximum loss will be restricted to up to Rs 3,600. If Nifty on expiry closes below 17,030 the strategy will start making profit, however, since one lot of OTM Put is sold which has helped to bring down the cost of Long Put but has also converted the strategy into limited risk and limited profits. The maximum gains will be restricted up to Rs 11,400 because the gains of long 17,100 strike Put will be offset by the sold 16,800 strike Put if Nifty closes below 16,800 on expiry.
(Rajesh Palviya, VP – Research (Head Technical & Derivatives), Axis Securities. Views expressed are the author’s own.)
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