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 the 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 now we are seeing an addition of fresh longs at around 18250 levels along with Put writing at 18200 strike. 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.
Bank Nifty has also been witnessing a fresh long buildup up since the start of the series. 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 11 levels in yesterday’s trade implying possible put writing at 18200. For the Bank Nifty 25th May, 43500 strike call option has the highest open interest implying resistance near these levels. Bank Nifty has strong support near 42500 levels now. For the Nifty, the VWAP (Volume weighted average price) of Nifty April Futures is around 18000 implying that to be the support. Above this, Nifty is to be positively biased for the short term towards 18400.
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 2.37, this ratio has a support at 2.30 and resistance near 2.41. We expect Nifty to perform well and maintain a buy on dips. Sector-wise IT, Auto, Banks & Cement look positive in Nifty.
(Manojh Vayalar is VP- Derivatives at Religare Broking Ltd. Views expressed are author’s own.)