F&O Show: Strategy For Nifty Bank On Expiry Day
F&O Show: #ReligareBroking's Manoj M Vayalar shares his F&O strategies for #Nifty and #NiftyBank in trade today. #BQLive
Transcript
00:00 Hello and welcome. This is BQ Prime. I'm Agam Vakil. And this is the F&O Show, a show in
00:05 which we take you through all the trends and all that is happening in Indian equity derivatives
00:10 markets, specifically futures and options. Well, to take a look at what's going on today,
00:16 we have, in fact, started off on a weak note. And after that, we are looking at a slight
00:20 rebound from a day's lows in today's GF trade for now. However, the Nifty and the Bank Nifty,
00:26 both of them are, well, trending lower as compared to yesterday. That said, it is a
00:32 Bank Nifty expiry. Well, we are watching out for the crucial level of 44,000 at the moment
00:38 because it seems that the Bank Nifty is looking to defend that. In terms of the Bank Nifty,
00:46 that's where we're also seeing the maximum open interest, the 44,000 call, at least at
00:50 the moment. And in terms of the most active options as well, naturally, we're seeing a
00:54 little more writing around the 44,000 call. And considering the fact that we have in this
01:01 very moment moved above that mark, it seems that that could become even more and more
01:05 crucial in terms of covering. But on the lower end, of course, keeping an eye on 43,900 put,
01:13 that's also where we've seen a significant amount of writing coming through. That said,
01:19 as far as the Nifty is concerned as well, we haven't seen too much traction. We are
01:23 watching out for the 19,500 mark. Again, a lot of traction there. And keeping an eye
01:31 on the 19,400 levels as well, considering it is just sitting above that mark. But where
01:39 do we go from here? And what do we do with the markets here? And is there any way by
01:43 which we can leverage derivatives, pun intended there, in terms of the strategies being proposed
01:51 more? Well, let's get in our expert for today. We have Manoj Bailar, who's been looking at
01:56 these markets for a very, very long, very experienced mind as far as derivatives are
02:02 concerned. He's from Religare Broking. Manoj, good morning and thank you so much for joining
02:06 in. It's great to have you back after a really long time. Can you tell us about how you are
02:12 approaching the Nifty at the moment? Good morning, Agam, and thank you so much for the
02:19 kind words. Now, Agam, I'm really more into the objective way of looking into the market,
02:24 more from the price action as well as the positioning that happens in the derivative
02:28 side. So let's go back and see, when we started this October series versus what we started
02:34 the September series, the Nifty positions were less by about 3 to 5 lakhs. Now, we understand
02:39 the concept of market-wide open interest. So whenever a new contract starts, a simple
02:44 way of understanding this is you need to see what is the fresh position that is made into
02:48 the current month. So it's like you have a portfolio of 1 crore rupees. So if you decide
02:53 to raise cash by a good 8 or 10 percent, so obviously you will roll less amount of positions
02:58 into next month. And consecutively, the position in the Nifty also comes down. So this is one
03:03 way in which we also try to see if there is a reverse arbitrage. Now, the favorite strategy
03:09 we have been doing that in the last 6 to 7 months is taking money out in the cash market.
03:13 And we are seeing some positions being built in the stock future. So the FI index started
03:18 this year with a good 70-72 percent short in the index futures. Now, we all understand
03:24 that obviously there is a huge amount of call options selling thanks to the weekly expiry
03:28 and on every other day. So the volatility index in the Nifty has been hovering around
03:34 that 12 to 13 odd percent. So that simply comes to a map saying that 700 to 740 odd
03:40 points is where the maximum month of October might be. Now, we believe that 19,700, now
03:46 that has become a resistance for this month of October season. And the Nifty might drift
03:51 down to 19,200 or 300. Now, because for the first weekly expiry that we have tomorrow,
03:57 we believe that in that, this is the Nifty futures level we are speaking about, 19,480
04:03 to 19,500, that's the resistance and we expect 93,20 on the Nifty futures. So a better way
04:09 is to go for the direction, do not really time the expiry. So by the 12th of October,
04:14 19,400 side put options between 100 to 110, keep the stock at 50. The target can be an
04:20 ambitious 170 rupees on that.
04:22 Right. Manoj, you know, we are also looking at the Bank Nifty expiry in today's day of
04:26 trade. If you could offer us your intraday view here, considering and especially given
04:32 it is a weekly options expiry.
04:34 Yeah, I'll give you a simple analysis, you know, a simple way to look into the Bank Nifty
04:41 Nifty coin. Just look at the number of points the Nifty is down and the number of points
04:45 the Bank Nifty is. When you see a ratio of 1 is to 3, that is 100 points fall on the
04:49 Nifty corresponds to almost 300 points on the Bank Nifty. Now, obviously, there is a
04:53 rationale on the quantitative analysis, we are not getting there. But just to say that
04:58 2.28, that is the ratio between these two indices, this is where the resistance is.
05:04 So 44,100 on the spot, roughly around 44,080 if I'm not mistaken. So 80 more points on
05:11 the upside is where the resistance is and unfortunately, we believe 43,800 on the spot
05:16 Bank Nifty is also possible today. So better trade is to buy a 44,100 put option, you
05:21 buy between 60 to 80 rupees. You need to hold it for the entire day, the target can be around
05:26 50 to 160 on that. All right, fair enough. So that's your interview as far as the Bank
05:32 Nifty goes. And well, we're keeping an eye on the 43,800 level at the moment. But, you
05:39 know, very quickly, let me as well, we'll talk about a handful of stocks which are buzzing
05:44 in trade today. So I'll take a look at Nestle India first, of course, because that's largely
05:49 because of well, the news coming in from what we understand is that the management will
05:55 consider a stock split. And because of that, we've seen a lot of traction. Now, Nestle
06:00 India is usually not a very active stock when it comes to the futures and options space.
06:05 But in today's day of trade, I reckon a lot of traders may have actually taken some sort
06:10 of positions. It just so happens that while Nestle India did show a tremendous amount
06:16 of strength, it has also given away all its intraday strength. So it's become extremely
06:20 volatile in today's day of trade. For now, after going up significantly high, it has
06:26 come off and it is now only trading 1% gains as compared to yesterday. The other stock
06:32 that I wanted to talk about was Bajaj Finance. And of course, Bajaj Finance has come up with
06:36 this quarterly update where, you know, on expected lines perhaps, we have seen good
06:43 growth coming in. Bajaj Finance also advanced and in fact, on intraday basis, it moved about
06:50 the mark of 8000. And that has also in fact, retracted from its intraday highs. So we're
06:57 looking at a little bit of perhaps profit taking because do remember that Bajaj Finance
07:02 has moved from 7500 levels to as much as 8000 only in about 6 to 7 sessions. So it's been
07:10 a quick ride there as well. So these are some of the stocks that I wanted to highlight to
07:15 our viewers. But Manoj, if I can come back to you on some stock calls that you have as
07:19 well, can you take us through yours? Yeah. So I think you're right, you were mentioning
07:25 Nestle. I think that is one stock, even if you look from the September to October CD,
07:28 it has good positioning. But now there are fresh calls in some stocks like a Tongue-It-Bomb.
07:34 We believe that 1968 to 1970, that's a good period. We did average price of support for
07:40 the stock. So that's a good level to buy that. The stock price can be 1940. And 2040 is what
07:45 we're expecting at least in the Tongue-It-Bomb for this October CD. Power Grid also from
07:50 the power sector, NTPC and Power Grid both, but we'll still go with Power Grid at this
07:54 point of time. 195 to 197, that's a good level to pull off. A stock price of 186 and a target
08:00 of 206 is very much possible in this stock. All right. Well, Manoj, since we have a little
08:07 bit more time, in general, I want also your view as far as the markets in a positional
08:14 basis are concerned. I'm sure that a lot of traders would perhaps want to take a slightly
08:19 longer term view. If you could give us your view on the markets, maybe perhaps not just
08:25 the specific expiry of the month of October, but over the next couple of expiries, how
08:32 would you address this? So the major shift in the Indian market has happened in 2016-17.
08:40 The FI used to be around 58 to 60 odd percent. And so the FI starts to dictate the trend.
08:47 But now if you see the distribution, they are closer to 46 percent with good amount of
08:52 HNI and the retail also at par to their weightage. So that is exactly why we are seeing this
08:56 volatility more. Now, FI has used a reverse arbitrage. Now, what is reverse arbitrage?
09:01 Simply, you do not disturb the price in the market, but you try to take out your money
09:05 by selling in the cash market, which is a delivery selling. And you hedge it by buying
09:09 some stock futures, which will keep on rolling from month to month. So this is this reverse
09:14 arbitrage, which is commonly known as RAID to the derivative field. So this reverse arbitrage
09:20 has taken a good amount of 8 to 12 months. The FI has been exiting. Now, we need to understand
09:25 the P0 percentage in the FI test used to be at 20 to 24 percent. This is three years before.
09:31 And now if I'm not mistaken, it is falling down to around 20 to 30 percent. Now, these are the
09:35 guys who need to convert the currency immediately to your local currency. And that is when the
09:41 trade comes in. So if you see the bank, the Nifty managed to still make a new high and the bank
09:45 has not done it also. You know, the last couple of months in the Nifty was doing the new high.
09:50 So it simply says that the money is not really pouring into the banking stock. And let's just
09:56 say the highest weightage, the banking and finances are almost at 8 to 39 or maybe a 40 odd percent
10:01 into the Nifty. So you so almost, you know, maybe one fourth, more than sorry, two third of your
10:09 Nifty is not being hampered and there is money which is coming out. And that's of the sector
10:14 like an IT or maybe a automotive is trying to pace it up. So the broader range is, you know,
10:19 we simply look into the entire weighted average at which this entire equation happens. So I was
10:24 just mentioning about 2.28. Bank Nifty and Nifty has a ratio between them. It is currently 2.26.
10:31 Now, unfortunately, the support is at 2.22. So if I were to say an 11th of 18,800 to maybe
10:39 an 18,900, you know, I believe that would be an 11th where the prudence of buying or maybe
10:45 the selling in the indices might come down and closer to 19,700 that is where. So this 900 odd
10:53 point is where the broader market would be and we all understand that 11th or 12th of this month,
10:58 we'll see the regional season coming in and that has a correlation to the Empire Pro and also from
11:04 the domestic institution. So if I have to say at least for this year end 2023 levels of 18,800 to
11:11 18,900 should be a good level. And once we reach 19,700, then Nifty should be heading to 21,200.
11:18 Now, this happens to be based on some quantitative analysis that we're doing. So as of now,
11:22 the downside is around 600 odd point, buy a put option to hedge your position, keep buying
11:27 quality stock because the upside can be a good 14 to 16 odd points in the next quarter's time.
11:33 Okay, well, watching out for levels over 20,000 comfortably as far as the benchmarks are concerned
11:42 for now and continue to hedge your positions by buying put. That's the
11:46 advice coming in from Manoj Vailar of Relia Securities. Manoj, thank you so much for
11:50 joining in and taking us through your views on the markets as well as the derivative space.
11:55 But on that note, we're signing out. But don't go anywhere,
11:59 Lossman lined up. Stay tuned to BQ Prime and we'll keep bringing you more.
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