ICICI Direct - Derivatives Weekly View (March 26): Nifty may consolidate between 14300 and 14800 ahead of result season...

Nifty may consolidate between 14300 and 14800 ahead of result season

The Nifty witnessed an extreme volatility monthly settlement and ended the month near the lows at 14325. A recovery on Friday helped in reducing losses and the Nifty closed the week with losses of more than 1%. Meanwhile, broader markets also remained lacklustre while both midcap and small cap indices continue to remain under pressure. Going ahead, we expect the Nifty to witness some consolidation ahead of result season, where it is likely to remain largely in the range of 14300-14800 in the short-term.

The Nifty has started the new series with relative low open interest indicating long closure during the recent weakness. However, the premium in April futures is significantly high and remains a concern. Normally, upsides in markets do not bode well with high premium. Hence, volatility is likely to continue in the index in the short-term.

Bank Nifty: Short covering can be expected only above 34000

The Bank Nifty remained highly volatile last week and even moved below our stated support of 33000. However, the late recovery in the index helped it to end the series near these levels with a loss of almost 10% during the series. On a weekly basis, the pullback seen on Friday helped the banking index to end with a loss of near 2%.

The Bank Nifty has started the April series with two and half year high open interest as weakness seen in the March series has prompted fresh short additions. We believe any recovery may be limited till we do not seen any major closure of positions in the banking index.

Positional Future Recommendation

Long Godrej Consumer Products (GODCON) April future in range of Rs. 710-714; Target: Rs. 765; Stop Loss: Rs. 682

Rationale

The FMCG space has remained largely range bound in the last couple of months. After remaining range bound for some time, the recent up move is likely to continue towards Rs. 765. On the F&O front, the last few sessions of the March series saw closure of open interest suggesting ongoing short covering. In the first session of the series itself, the stock has managed to close above its highest Call base placed at the 700 strike. We believe the ongoing short covering will continue, which should take the stock higher in the coming trading sessions.

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Source : Equity Bulls

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