Bouts of profit booking expected around 11,200-11,300 with high volatility: YES Securities

Navneet Daga

The recent bullish grit and gumption has come to a screeching halt as index posted second consecutive day of decline. Nifty posted back-to-back strong series with gains of 7.8 percent on (expiry-on-expiry) basis, while on sectoral front, only IT sector which gained 26 percent, has managed to outperform the benchmark index post the vertical fall in March.

Bank Nifty underperformance remained area of concern as it gained modest 0.7 percent on (eoe) basis. Highlights for the July series are - massive underperformance from banking stocks, leadership seen in Reliance Industries and IT stocks.

Nifty is currently struggling around 11,300 mark and its advance decline ratio was negative in the previous trade suggesting profit taking in selected stocks. Inability to sustain at the top and failure of Bank Nifty to contribute indicates that participants are using rallies to ease their positions.

FII’s derivative stats index futures long rolls stood at 81 percent against 3-month average of 75 percent while index futures short rolls at 47 percent against 60 percent on 3-month average.

August series starts with index futures long to short ratio of 1.96x for FII’s. On options front, August series starts with the buildup on monthly series 11k put strike holding ~3.1 million shares while on call 11,500 strike holding ~1.8 million shares. We expect bouts of profit booking towards 11,200-11,300 mark with volatility spike likely in near term.

(The author is Senior Derivatives Analyst – Institutional Equities at YES Securities.)

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