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If covering happens, beaten down sector like banking to give more returns

Commentary:Volatility remained extremely high this week as a sharp reversal was observed on both sides. FIIs continued to remain negative in the cash segment. In the last three sessions provisional data suggests they sold more than | 11500 crore. Banking has relatively underperformed after making a new lifetime high post negative news for few counters and slipped below all its major supports.

Major Option activity (Weekly):

Major Call OI change in today’s session: 17600 (7.5 lakh), 17800 (5.4 lakh) and 17850 (7.7 lakh).

Major Put OI change in today’s session: 17500 (13.4 lakh) and 17400 (8.3 lakh).

Outlook:The Nifty has reverted from its highest Put base of 17200 while the volatility index, which rose to 19%, has also declined. Leverage positions in the Nifty are too low, which is one of the positive sign as aggressive profit booking will not be there. The Bank Nifty has largely underperformed and despite a decent move, most heavyweights are near their Put base. We feel if a reversal has to happen, covering would be sharp in banking heavyweights due to which the Bank Nifty should head towards 38000 for the November series expiry and a close above this level should trigger more upsides. Today, it is hovering near its sizeable Call base of 37500 but almost double additions are there in Puts compared to Calls, which is the positive factor.