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Derivatives Weekly View - June 24, 2022 - ICICI Direct

Posted On: 2022-06-26 16:47:17 (Time Zone: IST)


Nifty

The Nifty recovered almost 2.5% last week in line with global indices after witnessing sharp sell-off in the penultimate week. However, broader markets have relatively underperformed as they failed to witness major recovery amid unabated FIIs sell-off. Auto and technology space led the gains while metals and energy stocks continue to face pressure due to global weakness. Considering quarter end settlement, we expect volatility to remain high. A short covering move is expected only if the Nifty sustains above 15700 levels.

Despite significant volatility, Call open interest remained largely unchanged at 15500 strike. Last weekly settlement has not diverged much from those levels. For the coming week, similar activities are visible at 15700 Call strike. Hence, a round of covering is expected only if the index closes and sustain above these levels. The Put base is significantly high at 15500 strike, which should act as immediate support.

Bank Nifty

Despite sharp moves in the Bank Nifty last week, it largely traded in a range with stock specific actions. Stocks like IndusInd Bank, Kotak Bank and Axis Bank relatively underperformed and supportive actions were seen in HDFC Bank, which actually rose almost 5%. The outperformance from private sector heavyweight helped the index move up almost 1100 points last week.

The Bank Nifty has a sizeable Call base placed at 33500 strike followed by 34000. Last week it managed to surpass and close above 33500 levels, which is a positive sign. We believe volatility is likely to be on the higher side due to rollover activities but some buying momentum is expected as it has closed above 33500 levels.

Positional Future Recommendation

Indraprastha Gas

Rationale

In the recent leg of volatility, IGL has relatively outperformed and managed to hold firm above its March lows whereas the Nifty violated those levels. As we have observed some reversal in the Nifty, we may be witnessing buying interest in such outperformer. IGL had a sizeable Call OI base placed at 360-370 strikes and last week has managed to close above this level. The stock is witnessing continued closure in open interest suggesting ongoing short covering. Hence, we expect continued up move in the stock during settlement week. It is likely to move towards its highest Call base of Rs. 400.

Mindtree Ltd

Rationale

Technology heavyweights managed to attract some buying from lows last week, which helped the index to recover. However, stocks like Mindtree failed to gauge follow up momentum and reverted from their sizeable Call base. The OI in the stock was almost flat last week except on Friday where again fresh short OI block was observed. The way the writing quantum has rose in 3000 strike Call we feel the stock will find it difficult to surpass these levels in the June series. Hence, we remain negative and expect the stock to test its recent low near Rs. 2700 levels.

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