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No respite for Call writers in Metal stocks

ICICI Securities 13 Jan 2022

Commentary:

In the recent leg of the Nifty recovery, metal stocks remained in focus while leaders like Tata Steel, JSW Steel and Hindalco saw decent buying. Ahead of the Budget, the Nifty is likely to head towards 18500-18600. We feel metal stock would contribute in the rally.

Major stock OI activity (Change): 

Name

Price

Max Call OI

Max Call % Away

TATASTEEL

1212.35

1200

-1

HINDALCO

505.55

480

-5

JSWSTEEL

684.75

700

2.2

VEDL

339.95

350

3

JINDALSTEL

414

420

1.5

COALINDIA

165.4

160

-3.3

NATIONALUM

113.45

115

1.4

NMDC

146.15

150

2.6

HINDCOPPER

137.6

140

1.7

SAIL

107.5

110

2.3

Outlook:

Most metals stocks started the January series with huge Call base in OTM strikes. However, few leaders like Tata Steel, Hindalco and Coal India have already surpassed their Call base and are trading much higher. Even for stocks like Jindal steel & Power, Hindustan Copper, JSW Steel and SAIL, the OTM Call base is only 1.5-2.5% higher. Looking at the overall activity on the F&O space, we feel these stocks would also surpass their Call base and move higher. Metals have an inverse relation with the Dollar Index. This means if the Dollar Index falls, metals price should find buying support. Recently, the Dollar Index has remained muted and moved near 95 levels, which is the support zone. A move below 95 levels should support metal prices, which would be positive for metal stocks.

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