Traders are suggested to go for hedging activities or initiate spread strategy to get the momentum by paying the limited option premiums.
Nifty formed a Three Black Crows pattern on daily and Dark Cloud Cover on weekly scale which indicates that bears are now getting active after the strong surge of 833 points in last six weeks.
It has been making lower highs – lower lows from last two sessions and now if it holds below 10,638 zones, then weakness could be seen towards 10,550 then 10,500 zones while if it sustains above 10,680 then only bulls would be back to take it towards 10,780-10,800 zones.
Index has taken a halt from its positive momentum so now requires a time or price consolidation to start the next up move.
Derivative
Nifty failed to continue its positive momentum in the last week and witnessed profit booking decline from higher levels. It remained negative for last three sessions of the truncated week.
India VIX moved up by 10.23 percent in last week after the decline of last four weeks, surge in volatility has given a pause in positive momentum. VIX has to hold below 13.50 to again get back the buying interest.
On the option front, Maximum Put OI is at 10500 followed by 10400 strike while maximum Call OI is at 11000 followed by 10800 strike. We have seen Put writing at 10400 and 10500 strikes while Call writing is seen at 10700 and 10800 strikes. Option data suggests a slight lower shift in the trading range between 10550 to 10750 zones.
Bank Nifty has been outperforming the Nifty index as closed positive with the gains of around 1 percent compared to Nifty loss of 0.69 percent on weekly basis. It managed to hold above 25,500 zones and a hold above the same could extend its move towards 25,750 then 26,000 zones while on the downside major support is seen at 25,250 levels.
Put writing at immediate strike, buying interest in HDFC Bank and ICICI Bank is keeping the positive momentum in the Banking index.
We expect stock specific action including movement in Tech Mahindra, HDFC Bank, IndusInd Bank and L&T Finance Holdings, while selective Tyre, Cement, IT and NBFC stocks would be under pressure.
Market will now keenly watch the outcome from Karnataka Election result that would decide the next leg of rally after the recent up move of more than 800 points in last six weeks.
Traders are suggested to go for hedging activities or initiate spread strategy to get the momentum by paying the limited option premiums.
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