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    Bank Nifty set for a potential tryst with 30,500-mark in March series

    Synopsis

    A dip of the index to 29,500 or slightly below could be bought into, data show.

    Bank-2---BCCL
    Shorts on the Bank Nifty are trapped and will be forced to close out their residual bearish bets, and this will fuel the rally further past the 30,000 mark, experts believe.
    The Bank Nifty has set its sights on the 30.5k mark within the current derivatives series which expires on March 28, traders’ action on Monday indicates. A dip of the index to 29,500 or slightly below could be bought into, data show. The potential support in case of an unforeseen event is at 28,500. The spot Bank Nifty closed up at 0.7% at 29,596.1, after hitting a fresh high of 29,812.

    They built huge positions at the 30,500 call on Monday, adding 241,900 shares (20 shares make one lot), taking the total open interest (OI) to a provisional 332,960. In the bargain the 30500 call became the out-ofthe-money call with the highest OI. The 29500 call, which held the second highest OI, gave way to the 30500 call.

    The 29500 strike saw sellers cover about 37,720 shares indicating their anticipation of the Bank Nifty surging well past this level, going forward, with the underlying index closing at 29,596. They instead did fresh sales at 30,500, which means option sellers don’t expect the index to break above that level in the current series, for now.

    “But, what this plainly indicates is the index has the potential to test 30,500, now,” said Chandan Taparia, derivatives analyst, Motilal Oswal Financial Services.

    Shorts on the Bank Nifty are trapped and will be forced to close out their residual bearish bets, and this will fuel the rally further past the 30,000 mark, experts believe.

    “The range (for Bank Nifty) just moved higher,” added Rajesh Palviya, derivatives head at Axis Securities.

    Interestingly, as the index broke past the 29,500 mark, bulls hugely sold the 29500 put, indicating that would be a good level to buy if the index dips.

    The near month option put call ratio (OI) of 1.5 reflects the bullish sentiment. FIIs are tanking up on index futures, having purchased a provisional Rs 828 crore of index futures on Monday.

    ICICI BANK ON A ROLL
    The stock’s futures contract is trading at a Rs 1.7 discount (Rs 397.95) to the cash share, indicating heavy buying of the latter. The open interest of the futures contact has risen over the past few days. It’s possible that buyers of the cash shares are hedging themselves by shorting the futures but there’s another data point which shows that against these short futures hedges they could be selling front month put options on ICICI Bank.

    Assume the cash share rises, their short futures position will reduce/neutralise their gain but they will earn through erosion of premium of the sold puts. The bullishness is reflected by the near month options’ PCR which stands at 1.12. The range for the current month is Rs 380-400 with a breakout of the range looking probable over the next few sessions.





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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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