The current price ratio (Nifty Bank/Nifty) has retraced and moved towards 2.48 from 2.50. We feel the outperformance in banking stocks will continue, which is again going to take the ratio higher towards 2.52 levels,
The Nifty50 has been forming a base near 10300 for the November series. The up move can be extended till 10600. During the week, more than 20 lakh shares were added in 10300 Put strike, which kept downsides limited
Call positions are getting added at the 10600 strike, which remains the target for the index. Closure was seen in the Nifty and Nifty Bank futures, which shows the short covering pattern seen in these indices
Volatility has seen a spike from 12.5 to 13.5 on account of closure of near the money Call strikes, which means downsides seem to be limited. This momentum should continue amid some range bound sessions.
Underperforming heavyweights from various sectors like banking, auto, IT and pharma have recently shown some resilience, which means, on any intermediate profit booking, the Nifty would be supported by these heavyweights.
In addition, increase in price ratio of (Nifty Bank/Nifty) to new highs means the performance in Nifty Bank would be supportive for the Nifty.
Being an expiry week, an opportunity can be seen in underperforming stocks where a short covering is expected.
Post approaching the highest Call base of 26000 last week, the index witnessed profit booking and consolidated in a narrow and tight band amid high volatility.
Throughout the week, the index witnessed a decent support near 25,650 whereas a decline in Put option premium of 25,700 strike and additions in the open interest is indicating major writing, which is likely to provide cushion going forward.
In this current leg of the rally, private sector banks continued to dominate whereas this time PSUs also supported the overall up move.
Investment & trading in securities market is always subjected to market risks, past performance is not a guarantee of future performance.
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