Expect 17,410 And 17,430 To Act As Crucial Support For Nifty, Say Analysts
Put and Call writers are now evenly poised in a wait-and-watch mode, according to analysts.
Analysts expect the Nifty to continue its current rebound towards 17,780-17,820 levels.
On a surge above 17,820, the index could move towards 18,000 levels, while on breakdown and sustenance below 17,410, further correction up to 17,250-17,180 will be on the cards, they said.
PSU banking, defence, banking and central public sector enterprises stocks are expected to do well in the coming week. A prudent way to play the index would be to buy Bank Nifty futures along with some ITM PE's, such as 41,500 Put Options, they said.
The markets witnessed a sharp recovery on Friday—resulting in the Nifty ending the week 0.74% higher—led by strong gains in frontline counters, especially stocks such as Reliance Industries Ltd. and ICICI Bank Ltd.
During the week, metals and banking sector outperformed the benchmark index, ending 4.12% and 3.36% higher, respectively. Within the banking space, the PSU banks outperformed ending 9.75% higher.
Broader markets recovered swiftly in the last session and the Nifty closed the week a tad below 17,600 levels, gaining almost 300 points in a single session. At the same time, broader markets have outperformed significantly as mid-cap and small-cap indices gained over 1.5% and 1.3%, respectively, against 0.75% gains seen in Nifty.
Here's what two analysts BQ Prime spoke with expect in the week ahead:
'With Surge Above 17,820, Index Can Move Towards 18,000 Zone'
Sudeep Shah, head-technical and derivative research desk, SBI Securities
Last week began with a negative bias, with the index breaching its 200 Daily Moving Average initially. However, the index witnessed a smart recovery on Friday, successfully managing to cross and sustain above its 200 Daily Moving Average—which is currently placed at 17,393.
The index has also managed to reclaim its 200 Day Exponential Moving Average placed at 17,581, implying a shift of sentiments—mainly driven by short covering in key large cap names.
The current Relative Strength Index reading has improved significantly, due to a strong up-move in Nifty on Friday—with RSI rebounding from its oversold levels around 35 to current levels of 46 indicating strength in the up-move.
Currently, 17,410-17,430 is expected to act as an important support till 17,410 holds. We can see index continuing its current rebound move towards 17,780-17,820; with a surge above 17,820, the index can move towards 18,000 zone. On breakdown and sustenance below 17,410, further correction up to 17,250-17,180 will be on the cards.
On the derivative data front, significant Open Interest Build-up is witnessed in 17,600-17,700 Calls, while 17,600-17,500 Puts have witnessed aggressive writing—implying 17,410-17,430 as key support, while 17,820-17,840 would act as key resistance going forward.
In the coming week, expect PSU banking, defence, banking and central public sector enterprises stocks to do well.
We like stocks like Canara Bank, Bank of Baroda, Reliance, Hindustan Aeronautics Ltd., ICICI Bank Ltd., ITC Ltd., PFC Ltd., Aditya Birla Capital and NTPC Ltd. from a short to medium-term perspective.
'Buy Bank Nifty Futures Along With 41,500 Put Options'
Rahul Ghose, founder and CEO–Hedged, an algorithm-powered advisory platform
The Nifty 17,500 Put options strike finally reduced its open interest for people who had shorted it in the last few days indicating this up-move. But it still managed to add huge fresh Open Interest today as new players joined in making this strike with the highest Open Interest for this week’s expiry. The Put writers and Call writers are now evenly poised in a wait-and-watch mode to see the price action and news flow developing out of the western markets over the weekend.
Bank Nifty, on the other hand, had a shift in the weekly expiry range for short strangles from 40,000 and 41,000 to 41,000 and 42,000. The highest Open Interest on the put sides are currently at the 41,000 strike for this week's expiry and the highest Open Interest on the call side is at the 42,000 Put options-Call options strike for the same expiry.
A prudent way to play this index would be to buy the Bank Nifty futures along with some ITM PE's, such as 41,500 Put Options. Once markets show a bounce of about 200 more points or half a percent in Bank Nifty, look to sell some far-out-of-the-money calls for this month’s expiry to protect your downside.