Market Outlook - Derivatives - October 3, 2020 - ICICI Securities

Raj Deepak Singh, Head - F&O, ICICI direct

Derivatives Weekly View (October 1): Positive bias to prevail with support at 11200...

The Nifty reclaimed most of the losses of last week and exhibited a strong recovery on the back of positive global cues. Expectations of a new stimulus by the US government before US election changed the sentiments. Despite continued FII selling, the Nifty gained almost 3% last week. Weekly settlement saw sharp short covering among banking heavyweights, which led Bank Nifty towards 22000. Going ahead, we expect the Nifty to consolidate with a positive bias with support around 11200.

The first week of the October series has significant volatility. Despite it finding stiff resistance around 11300 for a couple of sessions, the Nifty finally moved above the stated resistance with a gap due to positive global developments. For the coming week, no major Call option positions are visible and maximum writing is seen at 11200 and 11300 strikes suggesting immediate support for the index. The relative Call option positions are visible at 11500 strike above which the Nifty may attempt to test its previous highs of 11800.

Short covering target for Bank Nifty at 23000...

The Bank Nifty started the October series with a sharp up move and erased all the losses of the penultimate week by gaining almost 6% in a shortened week. The private sector banking space continued to outperform its PSU counterparts while IndusInd Bank was the major gainer of the week with upsides of almost 15%.

The banking index has started declining from 22000 in the last week of September when it moved towards 20000. Significant Call writing was observed in this strike. Also, with the Bank Nifty closing above these levels, further short covering cannot be ruled out. For the recovery to continue, we believe the Bank Nifty should sustain above 21500.

Positional Future Recommendation

Long Aurobindo Pharma (AURPHA) October future in the range of Rs. 812-816. Target: Rs. 862; Stop Loss: Rs. 788.5

Rationale

Post its quarterly numbers, Aurobindo Pharma reverted sharply and made a low near Rs. 750. Highest Call base for last series was at Rs. 800 levels. For the October series as well sizeable Call OI was at Rs. 800. However, as the stock managed to close above this level, short closure was seen and the OI shifted higher. Positions in the stock have moved till 900 strike as well whereas huge writing block was seen in 800 strike, which should provide cushion. We feel the current leg of short covering will take the stock towards Rs. 865 levels.

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

Source : Equity Bulls

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