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Technical and Derivatives Review |June 20, 2020
Base shifts higher at 10000 in the midst of uncertainty
Sensex (34732) / Nifty (10244)
Source: Trading View
Future outlook
Trading for the week started with a downside gap on Monday as the second wave of coronavirus started haunting market participants
across the globe. The selloff extended to test the sub-9750 levels. Somehow we stabilised from this global negativity, but all of a sudden on
Tuesday the news came out of a clash at the India-China border. Within no time, markets took a nosedive and remained under pressure for
some time. Fortunately once again we managed to defend key levels in the midst of all this uncertainty. But last two sessions turned out to
be excellent for the bulls as we witnessed a good broad based rally to eventually conclude the week convincingly above the 10200 mark.
Since last couple of weeks, 10000 was acting as a sturdy wall. Due to smart rally towards the fag end of the week, we finally managed to
traverse this barrier and headed towards recent highs. It is always good to see when a rally is mainly propelled by the banking
conglomerates; because it generally provides credence to the move. Looking at Friday’s close, the set up overall looks good and ideally we
should make a move beyond our recent highs of 10350-10400 to test higher levels of 10600-10800 in the forthcoming week. But the threat
of the second wave of pandemic and the geopolitical concerns are likely to loom over us now for some time. Hence, if there is no escalation
with respect to this, our markets are likely to continue this northward trajectory.
As far as supports are concerned, 10100 followed by 10000 would be seen as immediate support zone. Now, the base seems to have
shifted higher from 9700 to 10000 and here a breach of 10000 would again apply brakes on the optimism. Looking at the broader market
participation last week, traders need to keep focusing on individual stocks.
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Technical and Derivatives Review |June 20, 2020
Short covering and long formation leads index higher
Nifty spot closed at 10244.40 this week, against a close of 9972.90 last week. The Put-Call Ratio has decreased from 1.47 to 1.56.
The annualized Cost of Carry is negative at 5.26%. The Open Interest of Nifty Futures has decreased by 5.63%.
Derivatives View
Nifty current month future closed with a discount of 8.85 points against a discount of 17.55 points to its spot. Next month future is
trading at a premium of 26.35 points.
As far as Nifty options activities for the week are concerned, we witnessed open interest addition in 10300-10700 call options. On
the flipside, 10000-9700 put options also saw open interest addition. Maximum open interest for the monthly series is at 10500 call
option and 9000 put option.
In last couple of weeks, 9500-9700 put options in Nifty had seen a gradual build up and hence it was seen as the support range. Post
the news of India-China face off at the border, indices saw an initial negative reaction. Before the weekly expiry, 10000 call options
attracted writers due to uncertainty. However, on the weekly expiry day, index rallied higher and hence the call writers were forced
to cover their positions. We witnessed a combination of short covering and fresh long formations which led the index to end the
week well above 10200. FII’s too covered some of their short positions in the index futures segment as the market surged. The
options data hints immediate support at 10000-9900 whereas on the higher side 10300-10500 has good amount of open interest
build up. Traders are advised to use a buy on dip approach and use declines as a buying opportunity for the coming expiry.
Long Formation
Scrip
OI
Futures
Chg (%)
Price
Price
Chg (%)
MUTHOOTFIN
3466500
96.7
6
1180.75
20.36
EQUITAS
17644900
35.14
53.00
7.94
MANAPPURAM
18666000
31.60
151.85
3.86
L&TFH
32417600
29.21
67.75
7.54
RELIANCE
33936505
28.01
1760.35
10.79
Weekly change in OI
Short Formation
Scrip
OI
Futures
Chg (%)
Price
Price
Chg(%)
IGL 9004875 34.20 447.95 (7.08)
PAGEIND
155200
33.64
18085.75
(2.24)
NATIONALUM
40154000
32.67
30.85
(2.06)
INFRATEL
12762000
25.81
219.15
(2.40)
ITC
72780800
19.86
184.25
(4.95)
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Technical and Derivatives Review |June 20, 2020
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