The Hindu Business Line : Nifty future may see range-bound movement

The Nifty April future ended 2.2 per cent higher at 3482.05 against the spot close of 3480.7. The Nifty May future finished at 3491.05 and witnessed a rollover of about 38 per cent.

The rollover was lower when compared with the previous month’s figure, as traders preferred to book profits. The market-wide rollover is in the region of 35-38 per cent.

Follow-up

We had advised trades to go short on Nifty future if it dips below 3325 and had also advised them to buy 3300 put. Both these strategies would have yielded sharp losses.

We had also advised trades to go short on HDIL. This also would have resulted in losses as it touched the resistance level of Rs 150.

Outlook

Despite the sharp recovery, we feel that the Nifty future lacks conviction to move above the immediate resistance zone of 3515-25 level. If it sustains the momentum and closes above the 3525, then it has the potential to go up to 3660, which is the next crucial resistance zone. On the other hand, if it fails to sustain the current momentum, it has the potential to reach the immediate support level of 3225.

A dip below that (on a closing basis) can take it to 2925, which appears rather remote at this point of time.

Option monitor

The calls saw activity centered around 3300-3500 strikes while the puts witnessed trading activity around 3200-3500.

Among May options, 3500 and 3600 calls were active indicating the resistance zone for Nifty. Interestingly even in June call options - strikes of 3400 and 3700 - were in the active zone. On the other hand, puts saw activity in 3200-3400 range in Nifty. This indicates the broad range of Nifty between 3200-3700.

Volatility Index

Though the volatility index weakened slightly on Thursday and Friday, it is continuing to advocate a cautious outlook. The index, which is famously known as fear gauge, ended at 47.78 against the previous week’s close of 50.8. But during intra-day trading it peaked at 63 points.

Recommendations

We advice traders to adopt the following strategies.

Consider short straddle using 3400 strike, as we expect the Nifty to move in a tight range of 3300-3500.

While the 3400 call closed on Friday with a premium of Rs 105.4, the put ended at 34.8.

While the maximum profit in this strategy is the premium earned, the loss is unlimited if Nifty moves sharply in one direction. Writing options involve higher margin requirements.

FII trend

The cumulative FII positions as percentage of the total gross market position on the derivative segment as on April 23 is 35.21 per cent. They indulged alternate bout of buying and selling in derivative segment.

They now hold index futures worth Rs 13,286.71 crore (Rs 12,743.48 crore) and stock futures Rs 18,447.89 crore (Rs 16,370.08 crore).

Their holding in index options continued to be at record high. They now hold Rs 34,658.94 crore worth index options against the previous week level of Rs 27,150.9 crore.

More Stories on : Technical Analysis | Derivatives Markets | F & O Outlook

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page