Derivatives Weekly View - April 8, 2022 - ICICI Direct

The Nifty closed the week almost flat despite significant volatility. The merger announcement between HDFC and HDFC Bank helped the Nifty to scale 18000 on Monday but it gave away most gains in the later part of the week as HDFC twins scaled back and technology heavyweights also came under selling pressure ahead of the quarterly results. However, broader markets significantly outperformed and midcap and small cap indices, closing the week with gains of almost 3% each.

The high open interest seen in index futures seen in March series has reduced drastically in first week of the April series itself as current Nifty OI is just over 1 crore shares. Along with it, the basis has increased significantly and is close to 100 points. While such high premiums have not bode well for markets, it can be attributed to ongoing short covering.

Bank Nifty

The Bank Nifty started last week on an optimistic note but as global markets corrected and selling was also there in Indian indices, the Bank Nifty gave up its gains. However, on a relative basis, it has outperformed broader indices, which is a positive sign. Among leaders, HDFC Bank remains under pressure post the sharp rise whereas money inflow was observed in other private banks.

PSU banks have out-performed during the week. Going ahead, we feel stocks like SBI should attract some fresh buying as it has managed to close above Rs. 500 levels. Bank Nifty premiums have risen significantly. Hence, going ahead, there may be some consolidation in the index with intermediate support now pegged at 37500, which acted as a good support last week.

Positional Future Recommendation

1) Tata Chemicals

Rationale

In the recent leg of recovery, chemicals and fertiliser stocks remained in focus and few of them managed to outperform broader indices. Among leaders, Tata Chemical is one such stock, which has managed to close near its sizeable Call base of 1000. The OI in the stock is near its yearly low. We feel fresh buying interest should emerge in the stock in the coming days. During the recent consolidation, the stock attracted delivery based buying. Hence, we believe the stock is on the verge of a fresh 5-7% upside move.

2) Divis Laboratories

Rationale

In the current leg of the up move in the broader markets, pharmaceutical stocks have been laggards. Divis Laboratories is one such stock that has been underperforming over the past few months. The stock failed to pass through its supply zone of Rs. 4600 and reverted from there on. Along with that, it has seen noteworthy Call writing at 4600 strike, which indicates limited upside. As the broader market is performing, defensives like IT and pharma are likely to remain choppy and money outflow is likely to take place from these stocks. Hence, we expect Divis Labs to continue its underperformance. Any rise in the stock should be used to create fresh short positions.

For details, click on the link below: Link to the report

Source : Equity Bulls

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