Nifty 50 (22,147) and Bank Nifty (47,574) lost 1.7 per cent and 2 per cent respectively last week. Consequently, the futures contract of these indices too fell. Below is an analysis of futures and options data and projection for this week.
Nifty 50Nifty futures (May expiry) (22,275) lost 2.1 per cent over the last week. As this occurred, the cumulative Open Interest (OI) of Nifty futures increased – it rose to 155.7 lakh contracts on April 19 versus 130.4 lakh contracts on April 12. This indicates short build-up.
That said, the May Nifty futures found support at 22,000 and recovered on Friday. We expect the contract to see further upside this week. The nearest resistance level as per the chart is at 22,500. Subsequent barrier is at 22,750.
But if futures fall below 22,000, it can lead to another leg of downtrend where Nifty futures could touch 21,500 this week.
The Put Call Ratio (PCR) of Nifty options stood around 0.9 on Friday. So, the number of call and put options sold are nearly the same. Thus, option traders do not exhibit any bias. As per the option chain of April contracts, the nearest support points are at 22,000 and 21,800. On the other hand, potential hurdles are 22,300 and 22,500.
Strategy: Buy May Nifty futures now at 22,275 and on a dip to 22,100. Place initial stop-loss at 21,900. When the contract reaches 22,500, raise the stop-loss to 22,300. Book profits at 22,750. Alternatively, traders can buy a 22,500-call option (May monthly expiry). Exit this at the prevailing premium when Nifty futures reach 22,750. Or book loss if Nifty futures fall to 21,900.
But if the contract breaches the support at 22,000, go short with stop-loss at 22,250. Book profits at 21,500. Instead of futures, one can consider buying May monthly expiry 21,800-put. Exit this when Nifty futures fall to 21,500.
Derivative outlookFutures of both indices at a supportOption positioning appears neutralConsider long on futures or call optionsBank NiftyBank Nifty futures (May expiry) (47,831) dropped 2.3 per cent last week. But unlike Nifty futures, there was no short build-up. The downside was restricted as the contract found support at 47,000. It rebounded from this level on Friday, providing some hope for the bulls.
While 48,080 is the nearest resistance, there is a good chance for Bank Nifty futures to go beyond this level and touch 49,000 in the near term. That said, if the contract falls below the support at 47,000, it is likely to embark on a southward journey, possibly towards 45,300.
According to the Bank Nifty option chain, the support levels are at 47,500 and 47,000. On the other hand, resistance can be spotted at 48,000 and 49,000.
Strategy: Go long on Bank Nifty futures (May contract) now at around 47,830. Add longs if the price dips to 47,300. Keep initial stop-loss at 46,500. When the contract moves above 48,200, alter the stop-loss to 47,500. When the price touches 48,750, raise the stop-loss further to 48,200. Exit at 49,200.
Alternatively, traders can go long on the 48000-strike May monthly call option now. Liquidate this position at the prevailing option premium when the futures hit 49,200. Exit in case Bank Nifty futures falls to 46,500.
But if Bank Nifty futures decisively breaches the support at 47,000, exit the longs and short the contract with a stop-loss at 47,600. Target can be 45,500. One can consider buying put options instead. That is, buy 46800-put (May monthly expiry). Exit this option at the prevailing premium when the futures decline to 45,500.
