By Manojh Vayalar
This June series, Nifty futures started with a premium of 70-80 points for the current month. For the Nifty futures, FII maintained around 40% short positions, which is less than the last month’s series, which is now currently up to around 50% shorts. The index witnessed a long buildup rally since the start of this series which later faced profit booking, currently at lower positions. 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.
FIIs started this series with around 60% vs 40% index shorts last month which are currently around 50% as of yesterday. For the Nifty, the IVs for the options stayed at around 11 levels in yesterday’s trade implying possible short straddle at 18,500 strikes. For the Bank Nifty 29th June, 44,000 strike call option has highest open interest implying resistance near these levels. Bank Nifty has strong support near 43,500 levels now. For the NSE Nifty 50, the VWAP (Volume weighted average price) of Nifty June Futures is around 18,300 implying that to be the support. Above this, Nifty is to be positively biased for the short term towards 18,800.
With FIIs having medium shorts in the Index at par to the last month, we expect Nifty to only face some resistance at the higher levels. The ratio between Bank Nifty and Nifty is currently at 2.37, 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, Auto, Cements & Media look positive in NSE Nifty 50.
Trading Strategy: Nifty Short Straddle
Sell 15th June 18500 CE@ 170Sell 15th June 18500 PE@ 90Net Premium @ 260, SL 350Target @ 120
(Manojh Vayalar, VP-Derivatives, Religare Broking. Views expressed are author’s own. Please consult with your financial advisor before investing.)