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Relief rally fizzles out, pharma becomes the safe haven space
Sensex (27591) / Nifty (8084)
Source: Trading View
Future outlook
During the previous week, our markets showed tremendous resilience and in the process, managed to give smart recovery of more than
15% from the lows of 7511.10. Things started to look brighter but clearly at present we are in an abnormal phase and in such kind of health
crisis, it would be difficult for markets to give extended relief moves. This week, the proceedings started with a strong cut on Monday and
despite some pull back on the following session, markets once again resumed it’s downward trajectory. Eventually, the truncated week
ended with nearly seven percent cut from the previous weekly close.
As we all know, markets are clearly driven by fear and sentiments, and till the time, things with respect to coronavirus pandemic does not
subside, the pain is likely to stay in the market. Traders are advised not to create aggressive bets especially leveraged positions in such kind
of environment. This week, the INDIA VIX cooled off considerably from 12-year high, which is the only sign of relief; because it indicates a
possibility of volatility reducing and thereby shrinking the overall range in the market. It would be important to see how things pan out over
the weekend with respect to coronavirus.
As far as levels are concerned, 8000 followed by 7800 would be seen as immediate supports; whereas on the higher side, if market has to
see some relief, the Nifty needs to surpass 8300-8400 convincingly. In the recent past, financial stocks have been facing terrible sell off and
this week too, we saw tremendous underperformance from this space. Moreover, it would be unfair not to mention the stupendous rally in
Pharma stocks on the last day of the week. It has been the safe haven space for traders/ investors in the recent meltdown and now it
increases the possibility of the multi-year pain ending for this basket.
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Shorts in financials lead to underperformance
Nifty spot closed at 8083.80 this week, against a close of 8660.25 last week. The Put-Call Ratio has decreased from 1.23 to 1.18. The
annualized Cost of Carry is positive at 0.12%. The Open Interest of Nifty Futures has decreased by 2.98%.
Derivatives View
Nifty current month future closed with a premium of 0.70 points against a discount of 8.85 points to its spot. Next month future is
trading with a premium of 19.70 points.
As far as Nifty options activities for the week are concerned, we witnessed some open interest addition in 8500 and 9000 call
options whereas some open interest addition was seen on 8000 and 7500 put options. However, the overall activity in options
segment continued to be low due to high IV’s. Maximum open interest for the monthly series now stands at 9000 call option and
8000 put option.
During the week, the Nifty index corrected by 6.55 percent with some fall in open interest whereas Bank Nifty corrected by over 13
percent with rise in open interest by 6.88 percent. The Banking witnessed formation of short positions during the week. FII’s were
light on positions during last week but they have formed some short positions during this week. As per the options data, 8000 is the
immediate support for Nifty whereas 8500 is the resistance. The monthly options data indicates 7500 to be the next support below
8000 mark. One positive data noted was the fall in India VIX. If we continue to see this declining trend, then the volatility could
reduce in the near term. Analyzing the above data, the Banking and Financial space is expected to continue its under performance in
the coming week unless we see some short covering move. Stocks from the Pharma space witnessed long formations and hence, we
could continue to see some out-performance from this sector.
Long Formation
Scrip
OI
Futures
OI
Chg (%)
Price
Price
Chg (%)
TORNTPHARM 312000 58.38 2071.40 10.78
BIOCON 7555500 54.73 291.75 4.20
HINDPETRO 10752000 32.75 185.20 7.80
CADILAHC 2989800 23.77 275.45 8.06
LUPIN 6284600 22.63 655.15 18.63
Weekly change in OI
Short Formation
Scrip
OI
Futures
OI
Chg (%)
Price
Price
Chg (%)
JINDALSTEL 16815000 235.29 63.55
(29.15)
CUMMINSIND 901800 103.25 299.75
(17.31)
RBLBANK 13590000 54.16 110.20
(30.01)
CHOLAFIN 3842500 39.10 125.60
(25.88)
MARUTI 2520000 25.22 4006.15
(14.45)
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Sneha Seth Derivatives Analyst sneha.seth@angelbroking.com
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