By Manojh Vayalar
This May series Nifty futures started with a premium of 70-80 points for the current month. For the Nifty futures, FII maintained around 60% short positions, lesser than last month’s series, which is now currently down to around 52% short. The index has been witnessing a long buildup rally since the start of this series and we are now seeing the addition of fresh longs at around 18250 levels along with Put writing at 18300 strikes. We believe that a dip in the index could be an opportunity to enter into longs and hence the Buy on Dips is the trade sentiment in Nifty.
For Nifty, 18200-18500 should be the immediate range and we believe that the Nifty should be positively biased. Only if the Nifty spot closes below 18200, some profit booking might be seen. The VIX for the Nifty has been more or less at around 13% wrt 14% during the last monthly expiry implying limited nervousness.
FIIs started this series with around 60% vs 90% index shorts last month which are currently around 52% as of yesterday. For the Nifty, the IVs for the options stayed at around 12 levels in yesterday’s trade implying possible put writing at 18300. For the Bank Nifty 25th May, the 44000-44200 strike call option has the highest open interest implying resistance near these levels. Bank Nifty has strong support near 43200 levels now. For the Nifty, the VWAP (Volume weighted average price) of Nifty June Futures is around 18200 implying that to be the support. Above this, Nifty is to be positively biased for the short term towards 18500.
With FIIs declining short in the index this month, we expect Nifty to perform better and maintain a buy on dips. The ratio between Bank Nifty and Nifty is currently at 2.39, this ratio has a support at 2.35 and resistance near 2.44. We expect Nifty to perform well and maintain a buy on dips. Sector-wise IT, AUTO & Cement look positive in Nifty.
Nifty Bull Call Spread:
- Buy 01st June 18400 CE @ 125
- Sell 01st June 18500 CE @ 80
(Manojh Vayalar is VP- Derivatives at Religare Broking Ltd. Views expressed are author’s own.)
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