For Private Circulation Only
l and Derivatives Review
|July 04, 2020
Markets entering a corridor of uncertainty
Sensex (36021) / Nifty (10607)
Source: Trading View
Future outlook
Trading for the week started on a weak note owing to some sluggish cues from the global cues. However, the optimist traders
pounced on this opportunity and used decline to create bullish bets. As a result, we eventually managed to surpass the recent hurdle
of 10350-10360 during the mid week. This was followed by a continuation of the northward march throughout the remaining part of
the week to conclude the week at 4-months highest point.
In the recent past, despite intermediate hiccups we maintained our bullish stance and advocated against going short on the market.
The strategy played out well as we have seen all declines getting bought into and in the process, we managed to reclaim the 10600
mark. Now, from hereon, it would be very difficult for traders to carry their positions overnight as we have approached a corridor of
uncertainty now. If we look at the daily chart, the Nifty has reached a higher end of the Rising Wedge’ pattern and the major ‘200-
SMA’ is placed in the zone of 10800-11000. So at every 100-150 points upmove, the bulls will have to tackle these hurdles. Hence, in
our sense, traders who have been enjoying this bullish journey since last three months, should ideally start lightening up their
positions. Although the texture has not changed, it’s better to be safe than sorry and hence, one should take one step at a time
Technically, the bullish structure remains intact as long as we are trading above 10300-10200 and ideally we could have asked to
trail stop losses at these levels. Theoretically it may be correct but practically risk-reward is not favourable following this strategy
and hence, we advice staying light and wait for further developments. If we manage to go beyond 11000, we would see next leg of
the rally and there we can aggressively start participating again.
For Private Circulation Only
l and Derivatives Review
|July 04, 2020
Long formation by FII’s lifts index higher
Nifty spot closed at 10607.35 this week, against a close of 10383 last week. The Put-Call Ratio has increased from 1.33 to 1.50. The
annualized Cost of Carry is negative at 4.45%. The Open Interest of Nifty Futures has decreased by 3.16%.
Derivatives View
Nifty current month future closed with a discount of 34.90 points against a discount of 65 points points to its spot. Next month
future is trading at a discount of 40.65 points.
As far as Nifty options activities for the week are concerned, we witnessed some unwinding in 10300 and 10500 call options while
open interest addition was seen in 10600-11000 call options. On the flipside, open interest addition was seen in 10500-10000 put
options. Maximum open interest for the weekly series is at 11000 call option and 10400 put option.
During this week, Nifty surpassed the resistance of 10500 due to a combination of long formation and short covering. Although FII’s
didn’t rolled much of their index futures long positions during June expiry, they formed fresh long positions in this week which led to
an increase in their ‘Long Short Ratio’ to 52%. As far as options activities are concerned, the coming weekly expiry has seen good
build up in 10400 put option indicating immediate support now at this level. On the flipside, immediate resistance is seen around
10700-10800. Traders are advised to look for stock specific buying opportunities and trade with a positive bias for the coming week.
Weekly change in OI
Short Formation
Chg (%)
ASHOKLEY 45864000 42.99 49.20 (5.66)
Chg (%)
BEL 23826000 40.08 97.15 14.09
For Private Circulation Only
l and Derivatives Review
|July 04, 2020
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Technical and Derivatives Team:
Sameet Chavan Chief Analyst – Technical & Derivatives sameet.cha[email protected]ng.com
Ruchit Jain Senior Analyst - Technical & Derivatives ruchit.jai[email protected].com
Rajesh Bhosale Technical Analyst rajesh.bhosl[email protected]ng.com
Sneha Seth Derivatives Analyst [email protected]gelbroking.com