Nifty stages smart recovery towards end of short-trading week - Karvy

The Nifty opened on a positive note last week around 5700 levels and staged a smart recovery towards the end of the short-trading week. The index traded in the broad range of 5620-5720 for the week. It witnessed a sharp short covering rally on Expiry day and managed to close below the 5700 level. The index witnessed a flat expiry as against 5693.05 for the previous month. Going forward, the Nifty is likely to face selling pressure on bounce towards 5750 levels. The market closed in the green, gaining 0.55% W/W.

On the F&O front, the overall market open interest (OI) ended at Rs66,948 crore. The Index has a total OI of Rs 8,291 crore in futures and Rs 33,602 crore in options. The Nifty shed OI of 33.44% W/W. The cost-of-carry fell from 18.35% to 7.27%.

For the April series, the basis decreased to a premium of 31.70 points from 55.25 points premium over the week. For the May series, the premium fell to 50.30 points from 75.20 points. The implied volatility (IV) of calls fell on Thursday to close at 15.96% from 22.96% last week, while that for put options fell marginally to 15.36% from 16.78%. Overall market cost-of-carry increased to -10.49% from -11.05% last week on the back of closure in open interest of 24.50% W/W.

On the technical front, the Nifty has managed to give a weekly closing around the 200-EMA levels. It is likely to face selling pressure around the 5750-5780 zone, above which one can expect a short term reversal in trend. It can come under selling pressure again if it fails to sustain the 200-EMA for the first few sessions of this trading week.

Nifty Directional: Sell Nifty April futures @ 5740-5750; average: 5780; stop loss: 5820; target: 5620-5630; timeframe: 1 week.

Nifty Short Strangle: Sell one Nifty Apr 5900 CE @ 24-27 and sell one Nifty Apr 5500 PE @ 26-29; LBEP: 5450; UBEP: 5950 max profit: Rs.2,500; max loss: unlimited beyond breakevens; stop loss :Respective Strikes.

Source : Equity Bulls

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