Banking index looks short heavy: Angel Broking

Derivatives view by Ms. Sneha Seth (Derivatives Analyst, Angel Broking):

"Post yesterday's tail end fall, we started-off today's session with a downside gap. In the initial half an hour, we saw decent recovery but soon it got sold into and Nifty corrected below the 11200 mark. However, decent demand was seen at the lower levels which eventually bought the index almost towards the 11300 mark.

The banking index continued its underperformance in today's session. Banknifty was down more than 2% and we also saw a good amount of short formation in the futures segment. In the September month, BankNifty corrected more than 6% with open interest addition of 25%, indicating huge short formation. At present, BankNifty is hovering near an important support zone of 22000-22200 and considering the recent build-up, we believe this index is short heavy. Hence, we would advise traders keeping a close watch on this space for better trade opportunities.

As far as other sectors are concerned, metals and pharma pack showed decent recovery wherein counters like TATASTEEL, HINDALCO, JSWSTEEL, CIPLA and DRREDDY added a good amount of long positions.

In the Nifty options front, we saw massive writing in 11200 and 11250 put strikes. On the other side, 11300-11450 calls added fresh positions followed by unwinding in 11550-11850 strikes. Highest open interest concentration is now placed at 11000 put and 11500 call options.

Now, considering the broad based buying in today's session, we expect extension of this upmove towards 11400-11450. Hence, traders are advised trading with a positive bias for tomorrow's weekly expiry, intraday dips towards 11220-11250 shall be an opportunity to buy 11250 call options."

Source : Equity Bulls

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