Nifty and Stock Analysis

Nifty was able to break out of the 4050-4250 band last week. While the spot Nifty closed at 4318.3, a gain of about 1.5 per cent over the week, the Nifty future ended at 4293.4 (4240.75).

Overall open interest positions hit another high this week at Rs 81,992 crore against last week's Rs 76,006 crore.

Despite healthy rollover of open positions (for both index and stock futures), turnover remained rather dull compared with previous occasions.

Follow-up: Expecting a downtrend, we advised investors to go short on the Nifty July future with a stop-loss at 4250.

Currently, this strategy is in negative position. Those, who have not closed out their positions can hold on.

Outlook

The Nifty future is just a little way away from its all-time high of 4314.

While a breach above that level could take the Nifty future to the 4410-15 level, a dip below its support 4285 could weaken it to 4230 and even to 4115.

We expect the latter to happen, as Nifty future is in over-bought position.

Recommendation

We expect the market to open on a firm note but the rally may fizzle out later.

We advise investors to consider shorting Nifty July future and hold it till expiry. However, this strategy is for those who are willing to take risks. On other hand, the investor may also buy the Nifty 4150 put; it ended at Rs 54.5 on Friday.

Put/call ratio

Open interest put/call ratio increased to 1.58 against the previous week's 1.4 while volume wise PCR to 1.54 (1.03). This indicates a lot of puts positions were carried over and call positions were squared-off during last week when the market climbed sharply.

Implied volatility

IV declined for both puts and calls. While puts IV decreased to 15 per cent (21 per cent), calls implied volatility slipped to 18 per cent (19 per cent).

Though the relative stability in calls IV suggests strong undertone, the decrease indicate calm market condition ahead.

Backwardation

The Nifty future widened its discount and it now trails the Nifty by 24.3 points against last week difference of 11 points. This suggests that a lot of short positions were added.

Stock futures

ICICI Bank: We presented a negative outlook on the stock with a target range of Rs 900 on the downside.

Though the stock witnessed some pressure, it was able to remain firm and closed around previous week's levels of Rs 955.

We still believe that this stock could test Rs 900 level. Those who hold short positions on the counter can continue to do so. The market lot is 350 units per contract.

NTPC: We had presented a positive outlook on the stock and had said that it might not witness any sharp swings.

This counter also finished around the previous week's levels of Rs 153.

We still expect the stock to touch our targeted level of Rs 168 if it breaches resistance at Rs 158.

Consider going long on the stock keeping stop loss at Rs 150 levels. Market lot is 1,625 units per contract.

IDBI: The stock is at a critical stage. While a move post its 52-week high at Rs 121 could take it to Rs 135-140, a dip below current level could weaken it to Rs 110-105 level. We expect the latter to happen as the stock is in an overb ought position.

Consider shorting the IDBI future with a stop loss if it begins the week on a weak or flat note. In that event keep the stop loss at Rs 121.

FIIs trend

The cumulative FII positions as percentage of total gross market positions on the derivative segment as on June 21 improved to 35.20 per cent (33.83 per cent).

FIIs were predominantly net sellers last week. They now hold open positions of Rs 14,412.01 crore (Rs 20,135 crore) in index futures and Rs 19,968.99 crore (Rs 22,665.76 crore) in stock futures.

Position-wise, they hold 6,46,798 contracts (9,45,092 contracts) of index futures and 6,86,149 contracts (7,93,995 contracts) of stock futures.