Derivatives Weekly View (June 12): Consolidation possible in index amid short volatility positions - ICICI Securities

Consolidation possible in index amid short volatility positions

The Nifty witnessed a sharp fall from 10300 and almost tested the crucial support of 9500. However, thereafter, the recovery was equally sharp towards 10000. The index is expected to trade within a range after these volatile swings. US markets would continue to drive sentiments.

The US markets witnessed the sharpest volatility spike since March. The volatility index moved up from 27% to 42% in the US, which led to gap down opening in Indian markets. However, Indian market's volatility index moved up from 29.5% to 32.5%. This also saw some cool-off towards 30%. This resilience of Indian market has also become possible due to the resilient rupee, which has mostly traded in a range.

OTM Call writing, depreciating rupee to keep Bank Nifty move in check...

After outperforming from the recent bottom and moving towards 21300, stock specific actions were seen in banking stocks where PSU banks along with Axis Bank and Kotak Mahindra Bank remained in focus.

However, sharp reversals were seen on the weekly expiry day where Bank Nifty futures added nearly 9% of short OI block. As the news came that Supreme Court deferred hearing on moratorium case for next week, the Bank Nifty saw sharp volatility. It moved below 20000 and managed to end above 20500 last Friday thereby showing intraday volatility of more than 1000 points.

Positional Future Recommendation

Buy Mahanagar Gas (MAHGAS) June future in the range of Rs. 1050-1060. Target: Rs. 1170; Stop Loss: Rs. 995

Rationale

Mahanagar Gas has started performing after the recent quarterly results announcement. It had remained largely rangebound so far and is likely to witness good upsides. The highest Call base for the stock is placed at the 1100 strike. This strike would see closure as it starts moving higher. This will lead to short covering in this strike. The OI has been gradually increasing in the futures segment. Long additions have started, which has scope for further increase as the leverage is still quite low. The OI is still 50% lower than levels seen in March. Recent volume increase is really encouraging and suggests an up move in the stock.

For details, click on the link below: https://www.icicidirect.com/mailimages/Derivatives_view.pdf

Shares of Mahanagar Gas Ltd was last trading in BSE at Rs.1074.8 as compared to the previous close of Rs. 1035.8. The total number of shares traded during the day was 109974 in over 6307 trades.

The stock hit an intraday high of Rs. 1087.15 and intraday low of 1001.6. The net turnover during the day was Rs. 114780103.

Source : Equity Bulls

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