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Derivatives View
September 7, 2022
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Research Analysts
Raj Deepak Singh Nandish Patel
rajdeepak.singh@icicisecurities.com nandish.patel@icicisecurities.com
Nifty The Nifty ended almost flat on Tuesday. Healthy buying in RIL, Bharti
Derivatives View
Close Pvs Close % Change Airtel and metal stocks offset the loss incurred by financial and FMCG
Spot 17655.60 17665.80 -0.06% stocks. For the day, SGX suggests the Nifty is likely to open gap down
Future 17682.95 17710.00 -0.15% near its Put base of 17500. We expect the Nifty to hold 17500 level and
Basis 27 44 - witness a recovery post opening lower
OI (Lakhs) 141.93 141.89 0.03%
PCR 0.85 1.05 - Sell Nifty 17300 Put option (September 8 expiry) in the range of | 38-40
IV 19.48 19.66 - Target: | 12 Stop loss: | 52
Bank Nifty The Bank Nifty tested 40000 Call base but failed to sustain at higher levels
Close Pvs Close % Change and witnessed profit booking from thereon. According to option data,
Spot 39666.50 39805.75 -0.35% 39500 Put strike holds sizeable OI, which should act as immediate
Future 39812.25 39920.85 -0.27% support while on the higher side, 40000 Call strike holds substantial OI,
Note: Index calls may be changed, if view differs during market hours and positional recommendations given in Derivatives Strategy should not be linked to intraday
index/stock calls.
Source: NSE, Seediff, Bloomberg ICICI Direct Research
September 7, 2022 ICICI Securities Ltd. | Retail Equity Research
Nifty 17800 Call strike holds substantial OI…
OI in Lacs
OI in Lacs
25
60
50 20
40 15
30
10
20
5
10
0 0
39300
39500
39800
40000
40200
39400
39600
39700
39900
40100
40300
17500
17800
17400
17600
17700
17900
In Nifty, 17800 Call strike holds sizeable OI of ~83 lac In Bank Nifty, 40000 Call strike holds noteworthy OI of
Among Put strikes, 17500 strike holds sizeable OI of In Put option, 39500 strike holds OI of ~21 lakh
~59 lac shares. shares.
i) Dr. Reddy'S Laboratories (CMP: 4212.65) ii) HDFC Asset Management Company (CMP: 1977.85)
Buy DRREDD September Fut at | 4209.65-4215.65 Sell HDFAMC September Fut at | 1975.75-1979.95
Target 1: 4284.7 Target 2: 4392.7 Target 1: 1947.9 Target 2: 1902.9
Stop Loss: 4140.7 Stop Loss: 2007.9
6200 3700
5700 3200
5200 2700
4700 2200
1700
4200
1200
3700
1-Mar-21
1-Nov-21
1-Mar-22
1-Sep-21
1-Jan-21
1-Jan-22
1-Sep-22
1-Jul-22
1-Jul-21
1-May-21
1-May-22
7-Nov-20
7-Nov-21
7-Jul-21
7-Jul-22
7-Mar-21
7-Mar-22
7-Jan-21
7-Jan-22
7-Sep-20
7-Sep-21
7-May-21
7-May-22
Strategy Follow-up
Date Stock View Strategy Reco Target SL P&L Comment
6-Sep-22 RAIIND Buy Long Fut 205.2 207.8 202.6 -9100 SL Triggered
6-Sep-22 CONCOR Sell Short Fut 669.9 660.9 678.9 -9000 SL Triggered
Indraprastha Gas
140
130
120
110
90
80
70
30-Jun-22
30-Apr-22
31-Dec-21
28-Feb-22
Rationale
Post results, the stock has been consolidating in a broader range of | 750-820 for the past one month. The stock witnessed
significant delivery based activity last month in the range of | 750-800, which is a crucial support level for the stock. Since
accumulation was seen in this stock, the last couple of week, we believe downsides are limited and positive momentum is
likely to remain intact in the stock above the mentioned levels.
2) Sell Muthoot Finance (MUTFIN) September in range of | 1022-1027 Target | 950 and Stop loss | 1080.1
Rationale
Strategy Follow up
Underlying View Strategy Reco Target Stoploss Profit/Loss Comment
Dalmia Bharat Bearish Sell Futures 1555 1451 1610.8 21500 Profit booked
Container Corporation of India Bullish Buy Futures 714 765 685.5 -28000 Stoploss Triggered
• The Nifty ended the week almost flat despite significant volatility as it tested almost 17800 on higher side and 17200 on lower side in a
shortened week. MSCI flows helped the Nifty to move higher but volatile global markets put pressure at higher levels. However,
broader markets continued to outperform and both midcap and small cap indices gained almost 1% during the week. Going ahead,
we expect the current consolidation to continue while US inflation numbers may trigger volatility
• From the options space, like the last couple of weeks, Call writing remained significantly higher compared to Put strikes and 17700
strike remained the highest Call base. The OI at Put bases is almost half of the Call bases. This suggests a continued hurdle at higher
levels. Thus, closure among these shorts can be expected if the Nifty moves above its Call bases
• During the recent weakness, the Nifty saw accumulation of fresh shorts at higher levels and FIIs’ net shorts increased from 13,000
contracts to more than 60,000 contracts. At the same time, the premium in the Nifty has declined sharply along with these shorts. We
believe the index may remain range bound for sometime before witnessing any directional move. Hence, a short covering rally
towards 18000 can be expected if the Nifty moves above 17700
40
OI in Lacs
30
20
10
0
Source: Bloomberg, ICICI Direct Research 17200 17300 17400 17500 17600 17700 17800 17900 18000 18100
September 7, 2022 ICICI Securities Ltd. | Retail Equity Research 7
Bank Nifty: Declines towards 38500 stays buying opportunity
• The banking space remained an outperformer last week and helped the Nifty to close flat despite weakness seen in technology and
energy stocks. The Bank Nifty has given its highest weekly closing since November last year as buying interest was evident from FIIs.
However, it was midcap banking, which was under the limelight last week. We expect midcaps to continue their outperformance
while large caps may continue to consolidate
• The futures open interest in the banking index has declined marginally last week as it moved towards psychological levels of 40000.
We believe some profit booking has taken place. It may spend some time before taking out these levels. Even on the options front,
the Call base at ATM 39500 is almost double any other option base suggesting limited upsides in short term
• Most index heavyweights are witnessing significant options activities at ATM strikes suggesting expectations of range bound
movement in the short-term. Hence, the Bank Nifty may also consolidate where downsides also seems limited and levels near 38500
remain a buying opportunity
• Due to recent outperformance of the banking space, the price ratio (Bank Nifty/Nifty) has moved beyond 2.24 levels. We expect
1500
1000
500
0
38000
38300
38800
39000
39100
39500
39700
39900
40200
40500
38500
39300
40000
40700
Source: Bloomberg, ICICI Direct Research
September 7, 2022 ICICI Securities Ltd. | Retail Equity Research 8
Risk assets turn volatile as Dollar Index moves to 20-year highs
• Significant volatility was observed across asset classes last week as the Dollar Index moved to its 20-year highs. Continued positive
economic data from the US and weak data from euro area helped the dollar to remain firm. Also, another 75 bps rate hike is almost
certain after continued positive data from the US. As a result, commodity space saw sharp declines as gold moved below 1700 levels
once again while base metals have also corrected sharply as copper prices moved to lowest levels in more than a month
• FIIs ended August on a high note and due to MSCI inflows, net inflows for the month exceeded | 50000 crore which is the highest
monthly inflows seen since December 2020. While the first session of the new month saw some selling pressure we need to assess a
couple of sessions if there is any change of trend. During the week, FIIs have bought just over | 3900 crore while domestic institutions
also bought worth | 890 crore in equities
• On the F&O front, activities increased marginally and FIIs’ used higher levels to form fresh short positions. The net shorts in index
futures increased sharply during the week and reached close to 60000 contracts as FIIs have sold nearly | 2500 crore in index futures.
Moreover, even in stock futures, the net longs have reduced sharply and the current net longs from FIIs is the lowest seen since May
2022 as they sold more than | 3000 crore in the segment
• The rupee appreciated last week amid a sharp drop in crude oil prices.
Dollar Index vs. US$INR
Further, the rupee was supported by significant inflows in domestic
equity markets and drop in Indian federal fiscal deficit
• The dollar index edged higher and touched its 20-years high amid
hawkish comments from Federal Reserve Chair Jerome Powell. Mr
Powell told the Jackson Hole central banking conference in Wyoming
on Friday that the Fed would raise rates as high as needed
• We expect the rupee to trade with a positive bias and touch 79.60 in
the coming week. Moreover, a sharp drop in crude oil prices and uptick
in domestic equity markets will support rupee to appreciate further.
Investors will keep an eye on major economic data from the US like
0
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800
29-Sep-20 28-Sep-20
29-Oct-20 28-Oct-20
29-Nov-20 28-Nov-20
29-Dec-20 28-Dec-20
29-Jan-21 28-Jan-21
28-Feb-21 28-Feb-21
31-Mar-21 31-Mar-21
30-Apr-21 30-Apr-21
31-May-21 31-May-21
30-Jun-21 30-Jun-21
31-Jul-21 31-Jul-21
31-Aug-21 31-Aug-21
30-Sep-21
30-Sep-21
31-Oct-21
United Spirits
31-Oct-21
Muthoot Finance
30-Nov-21
30-Nov-21
31-Dec-21
31-Dec-21
Recommended Stocks : Historical price performance…
31-Jan-22
31-Jan-22
28-Feb-22
31-Jul-22 30-Jun-22
31-Aug-22 31-Jul-22
11
23-Aug-22 Reliance Industries Buy Long/Short Strategy: Buy Reliance Ind Sep future at 2625-2635 & sell 2740 Call at 54-56, Target: 2796, Stop-loss: 2495, Time-frame: till September expiry.
25-Aug-22 Larsen & Toubro Buy Long/Short Strategy: Buy L&T Sep future at 1910-1920 & buy 1900 Put at 45-50, Target: 2040, Max loss: 55-65 points, Time-frame: till September expiry.
1-Sep-22 Indraprastha Gas Buy Positional Future : Buy Indraprastha Gas SEPTEMBER in the range of 418-421 Target 455 and StopLoss 403
2-Sep-22 United Spirits Buy Positional Future : Buy UNISPI (UNITED SPIRITS LIMITED) SEP in the range of 825-830 Target 910 and StopLoss 784
2-Sep-22 Muthoot Finance Sell Positional Future : Sell MUTFIN (MUTHOOT FINANCE LIMITED) SEP in the range of 1022-1027 Target 950 and StopLoss 1080.1
5-Sep-22 Kotak Mahindra Bank Buy Positional Future : Buy Kotak Mahindra Bank September in the range of 1952-1961 Target 2100 and StopLoss 1889
6-Sep-22 Bank Nifty Sell Long/Short Strategy: Sell Bank Nifty 08 Sep 39500 Put at 145-155 & buy 38200 Put at 18-19, Premium inflow: 127-136, Target: 1, Stop-loss: 212
Date Scrip Action Price Target Stop Loss Last close Return at close Time Frame
11-Jul-22 Hero Motocorp Buy 2825-2865 3350 2568 2842 -0.1% 3 months
5-Aug-22 Sun Pharma Buy 900-915 1025 830 885 -2.5% 3 months
8-Aug-22 Amara Raja Batteries Buy 510-520 590 460 540 4.9% 3 months
23-Aug-22 Hindalco Buy 420-426 485 383 430 0.9% 3 months
We /I, Raj Deepak Singh BE, MBA (Finance), Nandish Patel BCOM, Dipesh Dedhia BCOM, MBA (Finance), Siddhesh Jain, BFM, MBA (Finance) Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this
research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that
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September 7, 2022 ICICI Securities Ltd. | Retail Equity Research 15