May Se­ries may Ex­pire Around 7300-7400

The Economic Times - - Markets & Finance -

Mar­kets have now di­gested the eu­pho­ria and op­ti­mism sur­round­ing BJP-led NDA govt’s clean sweep at the elec­tions and the sub­se­quent swear­ing in of its PM elect Naren­dra Modi. The fo­cus now shifts to pol­icy an­nounce­ments across var­i­ous portfolios that will keep the par­tic­i­pants hooked on to mar­kets.

In the last few ses­sions, F&O mar­ket in­ter­nals sug­gest long un­wind­ing in Nifty fu­tures and long buildup in Bank Nifty fu­tures. As per op­tions OI dis­tri­bu­tion, we ex­pect May se­ries ex­piry to be be­tween 7300 and 7400. Nifty OI put-call ra­tio is up from 0.88 to 0.91.

Nifty rollovers stand at 45% as com­pared to the aver­age rollover of 47% (last three se­ries), but on a higher base. Op­tions IVs con­tinue to see a sharp de­cline post the elec­tion re­sults, which is very much in line with our ex­pec­ta­tions. Go­ing for­ward, we be­lieve that the VIX in­dex can cor­rect fur­ther and test 14% lev­els.

Af­ter be­ing net buy­ers for ma­jor part of the month, FIIs have turned cau­tious and are now book­ing prof­its as seen in the past few ses­sions.

Af­ter a break­out to new all-time highs on mid-cap in­dex, we be­lieve the op­por­tu­nity is greater here and, hence, ex­pect strong out­per­for­mance. It is rec­om­mended to take longs in IDFC 150 call op­tion in the range of ` 5-6 for a tar­get of ` 12-15 and sug­gest keep­ing a stop-loss of ` 2. One can also look to buy Tech Mahin­dra June fu­tures at 1875 with a stop loss of 1805 and tar­get of 2075.

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