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Religare Broking's analysis suggests a period of consolidation for the Nifty index, following a slight gain the previous week. The prediction of a sideways movement within the 24000-25000 range is based on several key observations. Firstly, the significant open interest in the November weekly options at 25,000 CE (Call option with a strike price of 25,000) and 24,000 PE (Put option with a strike price of 24,000) suggests substantial market interest around these price points. The higher open interest in the 25,000 CE (approximately 9.5 million contracts) compared to the 24,000 PE (roughly 8.3 million contracts) might indicate a slightly bullish sentiment, although the significant presence of both calls and puts signifies a market expecting volatility around this range. To sustain the previous week's positive momentum, the Nifty needs to decisively close above 24,850. Failure to do so reinforces the expectation of consolidation. The report highlights a notable contrast between the FII (Foreign Institutional Investor) activity in the cash and derivatives markets. While FIIs have been net sellers in the derivatives market over the past seven days, they remain net buyers in the cash segment, with inflows exceeding ₹4,400 crores. This divergence might reflect a cautious approach or a shift towards a risk-off sentiment amongst some investors. This behavior underscores the need for caution and highlights the prevailing uncertainty within the market. The prediction is not solely based on options data but also incorporates an analysis of recent market trends and behavior of key market players. This makes the prediction more robust and reliable, although not foolproof, since market dynamics are inherently unpredictable.
The Bank Nifty index, mirroring the overall market trend, opened flat following a modest gain in the prior week. The analysis points to a significant resistance level at 53,700, where the index encountered resistance and subsequently closed negatively. The relatively unchanged futures open interest suggests a lack of significant directional pressure in the near term. This reinforces the recommendation for a cautious approach and a wait-and-see strategy until a clearer directional trend emerges. The lack of substantial change in futures open interest further supports the view of an uncertain market lacking a strong directional bias. This absence of clear directional pressure is consistent with the broader market sentiment outlined above, suggesting a period of consolidation and hesitation before any major price movement is likely. The analysis emphasizes that immediate support lies in the 52800-52500 range for Bank Nifty, while significant resistance remains in the 53600-53850 range. These identified support and resistance levels act as key indicators of potential turning points in the index's price movement and help to define the expected trading range.
Religare Broking recommends a specific trading strategy for the week: a Nifty short strangle. This involves selling both Nifty put options (24000 strike price) and Nifty call options (25000 strike price). The strategy aims to profit from the expectation of sideways movement between these price levels. The recommended selling prices are ₹27 for the put option and ₹24 for the call option. The strategy incorporates a spread of 51 with a stop-loss of 88 and a target of 2, assuming the trade is executed with an expiry date of December 19. This proposed strategy reflects their outlook of range-bound trading and offers an opportunity to benefit from limited price fluctuations within the expected range. However, it carries inherent risks, notably the unlimited potential loss if the prices significantly deviate beyond the expected range. This is a complex trading strategy that requires a strong understanding of options trading, and the associated risks should be carefully considered. It is crucial to reiterate the disclaimer that these recommendations are personal opinions and not official advice. Investors should consult qualified financial advisors before implementing any strategy based on this analysis. The potential profitability depends on the accuracy of the market's movement within the predicted range, and any significant deviation could lead to considerable losses. The strategy should be considered only by experienced investors with a high risk tolerance.
Source: Nifty may face resistance at 24800-25000, selling pressure expected ahead, says Religare Broking