The markets opened flat and then traded in the negative territory on Wednesday. NSE's Nifty closed at 5447 and was quoting at a premium of six points.
On the Nifty options, there was an addition of three lakh shares in the 5400 call option, while another six lakh shares were added in the 5500 call option. On the put side, there was a substantial build-up of over nine lakh shares in the 5400 put option, while 4,50,000 shares were added in the 5500 put option.
The gradual arrest in the uptrend and a fall to a lower range of Nifty levels over the past few days have come amid the increase in India VIX from 18.50 to 19.14, which suggests negative bias.
However, any breakdown from the range will be only on the back of a negative surprise from the RBI monetary policy . Among the sectoral indices, pharma, FMCG and consumer durables have seen a long build-up and so we recommend traders to go long in these sectors which can still outperform the broader market.
Bank Nifty, CNX Realty and Infrastructure are the sectors, which have shed some weight and appear to be weak at the moment. Being interest-sensitive sectors, their short-term movement will be driven by the outcome of the RBI policy.
Nifty Strategy:
A spread strategy can be adopted in Nifty for the June series. Buy a 5500 strike price call for around Rs 54 and buy a 5400 strike price put for around Rs 55. Total premium paid would be Rs 109 (maximum loss). Maximum profit if nifty expires above 5609 and below 5291
Stock Strategy:
A bull spread strategy can be adopted in Tata Steel for the June series. Buy a 560 strike price call for around Rs 14 and sell a 580 strike price call for around Rs 7. Total premium paid would be Rs 7(maximum loss). Maximum profit of Rs 13 if Tata steel expires at Rs 580.
Chirag Bavisi, Technical Analyst, Satco Securities & Financial Services
Source: Economic Times
Thanks and Regards,
Sanchari Sinha,
Intern at DENIP Consultants Pvt. Ltd.
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