Under-performer like Bank Nifty should out-perform in sectoral rotation
For the 5 weeks in a row, Bank Nifty remained under pressure but last week finally it consolidated and the quantum of selling (Call writing) was declined. After forming a base, today it managed to surpass the sizeable Call base of 37000. Along with these, in the current leg of up-move most of the banking stocks has reverted from Put base and saw closure in Call writing positions. This is a positive development and we feel upsides should continue.
Major Option activity (Weekly):
Major Call OI change in today’s session: 37100 (-2.76 lakh), 37500 (10.98 lakh) and 38000 (1.02 lakh).
Major Put OI change in today’s session: 37000 (23.68 lakh) and 37200 (9.98 lakh).
The current price ratio of Bank Nifty/Nifty has reverted from its support of 2.10 levels. Right now it stands near 2.13 and we feel it’s likely to head towards its October month high of 2.21. Bank Nifty future remained above 37200 levels post the policy out-come along with this there is a huge Put writing activity in 37000 and lower strikes. We feel the current leg of upsides should take the index towards 38000-38500 levels. The Nifty is likely to remain in range due to sectoral rotation and money flow is likely to move from technology and pharma space to banking and metals. Hence from the current levels one can also look at buying Bank Nifty future and selling Nifty future for December which has a ratio spread of 2.13 (Bank Nifty CMP/Nifty CMP). Target for the same should be 2.22 and SL should be placed at 2.10 levels.