Nifty may find support at 5300 level

Synopsis

As acold arsenic banal futures are concerned, we are precise adjacent to the highest-ever unfastened involvement with 195 crore shares successful unfastened interest.

The Nifty started Wednesday’s commercialized connected a alternatively timid note. As the underlying scale was softly drifting downwards, the futures started trading astatine a deeper discount of astir 10 points.

It was the past hr of commercialized that saw amended volumes and a crisp movement. The autumn amid planetary uncertainties has brought the Nifty erstwhile again to the level of 5400. Even the information seems to beryllium a small scared, arsenic Nifty futures ended the day’s commercialized with an summation of implicit a cardinal shares successful open interest indicating instauration of hedges.

As acold arsenic stock futures are concerned, we are precise adjacent to the highest-ever unfastened involvement with 195 crore shares successful unfastened interest. With astir 70% of the stocks inactive trading with a premium, the bias among participants seems to beryllium upwards. This would make a spot of unit connected the marketplace successful lawsuit of immoderate macro uncertainty.

As we are astir fractional mode done to expiry, it makes consciousness to proceed with agelong positions, but on with agelong puts simultaneously truthful that losses are capped, inactive keeping each the upside open.

On the options side, Nifty August bid unfastened involvement put-call ratio is astatine 1:58, indicating a moderately bullish composition. Even the implied volatilities constituent of the options which bespeak the presumption of the hazard remains precise low. This indicates we whitethorn not spot a immense downside arsenic acold arsenic the August expiry is concerned. With implicit 10 cardinal shares successful 5300 August Put, the Nifty whitethorn find enactment astir the level of 5300.

We consciousness 1 tin bash a Nifty carnivore ratio dispersed to hedge trading longs, by buying 1 batch Nifty August 5400 PE & selling 2 tons of Nifty August 5300 PE.

This strategy accrues nett wrong the 5200 & 5400 scope successful lawsuit the Nifty ends up successful this scope connected expiry. On the lawsuit the Nifty heads upwards to adjacent supra 5400, 1 tin inactive person a currency inflow and nary outgo of hedging. The strategy does incur nonaccomplishment beneath 5200, which we consciousness shall clasp bully for the August expiry.

(Bhavin Desai is Manager (derivatives), Motilal Oswal Securities )

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