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Nifty Bank likely to see resistance at 32,000; deploy Bull Call Spread

Bank Nifty options data for upcoming weekly expiry depicts 31,000 as strong support as aggressive Put writing is seen at 31,000 and on upside the highest Call OI is at 32,000, which can act as strong resistance

SHUBHAM AGARWAL | 03-Jun-19
Reading Time: 3 minutes

It was a volatile week for key indices as both Nifty and Bank Nifty witnessed a swing of 360 and 1,300 points, respectively, for the week ended May 31.

Nifty spot touched an intraday high of 12,039 but the momentum fizzled out as profit booking dragged the indices lower.

The Bank Nifty followed Nifty as it touched its lifetime high of 31,815 during the week, but profit booking at higher levels erased some gains and the index closed just 0.33 higher.

In terms of sectors, IT, oil & gas and private banking stocks were the top gainers for the week. TCS was top gainer among IT pack, up 6 percent for the week, followed by Infosys and Tech Mahindra that gained about 3 percent each in the last five trading sessions.

While in the oil & gas sector, Oil India was the top gainer up 5 percent followed by BPCL and HPCL, both up by 3-4 percent.

In the banking space, Yes Bank was the top gainer among the private banking space, up 3 percent followed by HDFC and Axis Bank that rose 2 percent each for the week ended May 31.

On expiry basis, both indices futures rolled ~8 percent higher than their respective 3-month average. While Nifty lost 4 percent to event hedgers unwinding, Bank Nifty added over 7 percent.

Rollover for Nifty stands at 71.5 percent and for the Bank Nifty at 82.76 percent for the June series with a rollover cost of 0.27 percent and 0.25 percent, respectively.

Rollover of more than 95 percent was seen in Century Textiles, Zee Entertainment, Indiabulls Housing Finance, Glenmark Pharma and Exide Industries while lower rolls were seen in Tata Global, Havells India, IndusInd Bank and GAIL India.

Nifty options data for the upcoming weekly expiry shows a tight range as the highest Put OI is placed at 11,800 that can act as strong support, while the highest Call OI is placed at 12,000 which can act as a major resistance.

Bank Nifty options data for upcoming weekly expiry depicts 31,000 as strong support as aggressive Put writing is seen at 31,000 and on upside the highest Call OI is at 32,000, which can act as strong resistance.

The Bank Nifty added 7 percent on an expiry-to-expiry basis. The index has strong support at 31,000 due to aggressive Put writing while on the upside Call writing placed at 32,000 makes it a tough resistance to breach. It has opened room for a bullish strategy i.e. Bull Call spread in Bank Nifty.

A bull call spread is a bullish strategy designed to benefit from a stock's limited increase in price. It is formed by buying a call and selling a higher strike Call to fund it. The initial outflow is lower in this strategy. It is a net debit strategy with limited risk.

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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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