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Deploy Nifty modified call butterfly spread strategy: Shubham Agarwal

Considering the consolidation Nifty along with in India VIX, an upcoming week can be approached with a low-risk strategy like Modified Call Butterfly in Nifty. Looking at the sentimental indicator, Nifty OI PCR for the week has decreased from 1.092 to 0.94.

SHUBHAM AGARWAL | 12-Jul-21
Reading Time: 3 minutes

Consolidation continues in Nifty as it is trading in a broader range of 15,900—15,500 for five weeks now, a series of gap up and gap downs with high volatile sessions has been witnessed in weeks gone by still indices fail to make any directional move.

In June, the Nifty touched a fresh all-time high i.e. 15,909, and has been struggling to surpass these levels since then. Nifty shut shop around 15,722.45 with a loss of 0.12 percent.

While Bank Nifty on the other hand had a decent run as its outperformance Nifty with a gain of around 1 percent last week, Bank Nifty closed around 35,270.40. Bank-Nifty over the week traded between 36,000 to 34,500. On the OI (open interest) front, short and long built up has been witnessed last week in Nifty and Bank Nifty, respectively.

Further diving into the Nifty upcoming Weekly expiry Call writers showing aggressions by building more position compared to put writers. Immediate and vital resistance stands at the 15,800 levels where nearly 49L highest among all followed by 16,000 levels with 42L shares.

On the lower side, 15,000 stands at the vital support level where nearly 34L shares have been added while 15,700 will work as immediate support with the addition of 34L shares.

Looking at the Bank Nifty upcoming weekly expiry data. On the upper side, immediate resistance stands at 35,500 (9.0L share) followed by 36000 (13L shares). Whereas, on the downside, 35,000 (14L shares) stand at the immediate support level and are followed by 34,500 (9L shares) as the vital support level.

India VIX, fear gauge, rises nearly 7 percent from 12.09 to 12.96 over the week. India VIX is trading near the lowest level of pre-COVID-19 crash. Cool off in the IV has given relaxation to the market. Further, any downticks in India VIX can push the upwards momentum in Nifty.

Looking at the sentimental indicator, Nifty OI PCR for the week has decreased from 1.092 to 0.94. Bank Nifty OIPCR over the week decreased from 0.83 to 0.789 compared to July 9. Overall data indicates more Put writers over call writers in Nifty & Bank Nifty.

Moving further to the weekly contribution of sectors to Nifty. Last week, there was a mixed contribution from all sectors to Nifty. NBFC and Private banks have contributed nearly 42.26 and 36.12. Whereas IT and Oil contributed nearly 27.08 and 25.77 points negatively followed by FMCG and Auto 20.09 and 18.01, respectively.

Looking towards the top gainer & loser stocks of the week in the F&O segment. AU Small Finance Bank topped by gaining over 14 percent, followed by Tata Steel 9 percent, Granules 8.6 percent. Whereas, Tata Motors has lost over -11.7 percent, NMDC -6.8 percent, HPCL -6.0 percent over the week.

Conclusion

Considering the consolidation Nifty along with in India VIX, an upcoming week can be approached with a low-risk strategy like Modified Call Butterfly in Nifty.

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SHUBHAM AGARWAL is a CEO & Head of Research at Quantsapp Pvt. Ltd. He has been into many major kinds of market research and has been a programmer himself in Tens of programming languages. Earlier to the current position, Shubham has served for Motilal Oswal as Head of Quantitative, Technical & Derivatives Research and as a Technical Analyst at JM Financial.

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