The F&O Show: Nifty And Nifty Bank Strategies For November Series
#Sensex rises 530 points, #Nifty recoups 19,000; All sectors in the green.
#IIFLSecurities' Jayesh Bhanushali shares his top F&O picks for new series. #BQLive
#IIFLSecurities' Jayesh Bhanushali shares his top F&O picks for new series. #BQLive
Transcript
00:00 Hello and welcome. This is BQ Prime. I am Agam Vakil and you are watching the FNO Show,
00:05 a show in which we take you through all that is happening in the futures and options space.
00:09 For now, we are taking a look at the markets and we are seeing an advance, a little bit
00:13 of shortcoming rally with the Nifty reclaiming the 19,000 level and we are seeing strength
00:17 in the Bank Nifty too. In fact, we are seeing a lot of foul covering from yesterday. Remember
00:25 that yesterday a lot of the concentrated positions were with respect to yesterday's monthly
00:29 expiry and as we move into the next month, the next series, that is in terms of the weekly
00:35 as well as the monthly options, that is where we are starting to see a little more coming
00:40 through as far as positional short covering is concerned. That said, in general, to take
00:48 a look at all that is happening in terms of activity with respect to the options in the
00:52 coming week, coming down to the Nifty too, what we are seeing is a little more traction
00:57 back around the 19,500 and the 19,000 marks. In fact, maximum open interest for the 2nd
01:06 November options expiry is at around 19,500 call and the 19,000 put and a lot more activity
01:13 around the 19,100 call which is seen in addition along with the 19,000 put as well. So, a little
01:18 more writing coming through. Coming down to the Bank Nifty too, even as we see an advance
01:24 of around 1.5% on the index and the short covering in this index is a little sharper,
01:30 max OI stands at around 43,000 call and the 42,500 put and of course, a lot of activity
01:36 around the 42,700 marks. In general, of course, it's looking like a Friday which most likely
01:47 could end in the green after not only a volatile but also a weak beginning to the new series.
01:55 That said, let's see how things go and things pan out. But let's get in an expert voice
02:01 to tell us about how things can work out over the course of the next one week and the next
02:07 one month. We have Jayesh Bhanushali. He is the lead research at IFL Securities. Jayesh,
02:13 good morning and thank you so much for joining in. As we move into the new series, that's
02:18 the November series, Jayesh, what's your view here and what's the way forward and what is
02:23 your assessment of the markets at the moment?
02:25 Yeah. Hi, Agam. Good morning to all the viewers. So, basically, if you see, this has been a
02:32 trend throughout the last one year. On two out of three occasions, we have seen that
02:36 whenever there is a huge unwinding happening, either on a long or short side on the expiry
02:43 day, the next day is a contract. So, yesterday we saw a deep cut in markets and today we
02:49 are seeing the first day of the new expiry, we are seeing a humongous amount of buying
02:54 happening throughout the last one hour. So, this has been the general trend throughout
02:58 the last one year. But I believe that the current momentum in the markets may take Nifty
03:04 up to 19,150 or 19,200 levels. That would be the ceiling for the markets if you see
03:12 for this week's expiry, the first week of November expiry. And in terms of Bank Nifty
03:19 also we remain a bit positive. We expect the indices to test 43,500 levels, which is where
03:28 the immediate resistance is. So, if you ask me for the entire November series, my view
03:35 would be to sell the indices on rise as I believe the indices would try to get back
03:42 to the previous lows which were created yesterday. And these lows would mark the bottom for the
03:48 market. So, we expect indices to bottom and Nifty to bottom around 18,500 to 18,700 levels
03:56 considering the entire November series and Bank Nifty to bottom around 41,000 to 41,500.
04:03 But for a short-term immediate basis, since you mentioned correctly, we are observing
04:08 short covering in the markets. This short covering could take the indices up to 19,150
04:13 levels. Because yesterday if you see, the indices tested the 200-day exponential moving
04:19 average after a long period of time. So, whenever the indices test such big levels, there is
04:25 a support that comes into the market and which leads to an upmove of around 1-2%, which is
04:31 what exactly is happening now. But I believe for the next couple of days, another 150 points
04:39 upmove could be possible. But if you ask me for the entire month, I believe we could see
04:44 selling pressure at a higher level and we will be back to 18,600-odd levels during the
04:49 coming days.
04:50 Right. So, based on these observations, Jayesh, how would you play the Nifty at least say
04:57 over the span of the next few days?
04:59 Yeah. So, for a span of next few days, I would like to create a ratio position in Nifty,
05:08 which is iron ratio spread. What we do is, we will be buying one lot out of so many call
05:16 options, which is around 19,100 level and we will sell two lots of 19,300 calls. And
05:22 on the downside, we will buy 18,800 puts and we will sell two lots of 18,600 puts. So,
05:30 basically what we are doing is we are covered both ways. If Nifty stays above 18,400 and
05:36 19,500, in between 18,400 and 19,500, we are going to make money in this spread.
05:43 Okay. So, that's largely playing for a relatively range bound trade going into this week. Jayesh,
05:51 as far as your Bank Nifty is concerned, would you have a similar strategy or would you play
05:56 this differently?
05:57 Same strategy in Bank Nifty too. So, we have been following this strategy since last five
06:04 years and if you see the volatility in the indices, the daily volatility of Bank Nifty
06:12 has been around 1.5% if you consider high and low price. And because of that reason,
06:17 we are observing that the delta part of this strategy would yield a positive payoff. So,
06:25 on the lower side, we expect 40,000 levels to hold throughout the November series. And
06:30 on the higher side, we don't see the indices going above 45,500 or so. So, basically, if
06:37 we cap the wings in this range, we are going to make money.
06:41 All right. Fair enough. So, well, in general, what Jayesh is playing at is that he is buying
06:49 the strangle on either side and then that would, of course, be one lot. And then further
06:57 out, he's selling a strangle, but that would be in the ratio of two lots to the one that
07:02 is the strangle that he's bought to perhaps simplify it in one way. But Jayesh, before
07:09 I come back to you, let me just quickly address what's happening in the markets. And at the
07:14 moment, as far as stocks are concerned as well, what we are seeing is among the stocks
07:22 that are seeing strength in today's job trade is Coal India. That's up around 2.4%. And
07:27 SBI, that's up around 2.4% as well. Reliance Industries will, of course, announce earnings
07:33 later on today. And that's up around 7.8%. That's where a majority of the support is
07:39 coming in for the indices. So, naturally, a lot of these companies are, in fact, shedding
07:46 some, well, I would say strength to the indices in today's job trade. Reliance, of course,
07:51 being right at the top. Do remember that Reliance and HDFC Bank were the two counters which were,
07:56 in fact, leading the indices down yesterday. And we have some relent in at least Reliance
08:01 Industries in today's job trade. On the losing end, we don't have too much in terms of the
08:05 benchmarks. Dr. Reddy is the biggest loser, but that's losing out less than 0.5%. So,
08:11 not too much to speak for as far as shorts are concerned. I reckon today, well, at least
08:18 the bears would hope that would be a positive day to end a considerably volatile week. But
08:25 Jayesh, coming back to you in terms of stocks, could you take us through a handful of names
08:33 that you are playing? I believe you have something on Chola Finn. We have Trent as well as Sriram.
08:39 You have buy calls for all of them. Can you take us through your views here?
08:43 Yeah, definitely. So, basically, we believe November series would be very good for NBFC
08:51 stocks. And if you see the earnings of most of the companies, the monthly updates that
08:56 these companies have given, they are likely to outperform during the next one or two months.
09:03 So, we have amongst our topic, we have Chola Investments. So, currently, it is trading
09:08 around Rs. 1176. We believe there is a huge potential that it could head towards the levels
09:17 of Rs. 1250 during the November expiry. So, one can buy at the current market price and
09:23 the stock would be around Rs. 1130-Rs. 140 and the upside would be Rs. 70-80. The second
09:31 stock is again from NBFC, Sriram Finance. If you see today's open positions, there has
09:40 been a humongous amount of long positions being added in the stock. And we believe that
09:46 Rs. 2250 could be the upside for the stock. Hence, one can also buy Sriram Finance. The
09:56 third stock is from Retail, which is Trent. If you see the rollovers, 98% positions have
10:05 been rollovered during this month, which is very significant in terms of, if you see it
10:12 historically, how the rollovers have been. So, from here on, we believe even in Trent,
10:18 there is a potential upside of 4-5%, which can be seen. Hence, all these three stocks,
10:26 we believe could yield a strong payoff during the next week also.
10:29 Okay, so those are some buy calls coming in from Jayesh. At the moment, we are seeing
10:37 the markets hold on to the strength that we have seen since morning. And plenty of other
10:42 stocks have also in fact reversed a substantial amount of their losses from what we have seen
10:46 yesterday. On that note, Jayesh, we will thank you for joining us and taking us through your
10:52 views as well as some strategies as far as benchmarks are concerned. We will be signing
10:57 out for now. But don't go anywhere. There's lots more lined up. Stay tuned to BQPrime.
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