AS we step into the new financial year which marks the beginning of the earnings season, indications from the derivative statistics are giving bullish signals. To begin with, FII inflows and bullishness in crude are external parameters, which are supporting the positive move to
come in the market. From a derivatives perspective, 5200 seems to be new support for the market. There has been a substantial writing which took place in the ‘Put’ option of this strike. FIIs, too, sold some of it. Implied Volatility (IV) has shifted in the lower range which was prevailing in the bull run of 2007. Though not significant, but we have started witnessing unwinding in 5300 Calls and 5400 becoming more active. Nifty futures, too, have seen a formation of fresh long in the April series, as both foreigners and domestic participants are buyers in the cash market. But still, premium in Nifty futures has surged to 16.30 points for this series. All above factors suggest that the resistance level of 5300 has to go and the market may witness 5400-5450 levels in the next few trading sessions.
This journey of the next 150 points in the Nifty may be broadbased. We expect the mid-cap space to outperform large-caps. It’s a long expiry. So, we won’t see much of time decay on the options side this week. There are many mid-cap stocks, which are trading at their support levels and have liquidity in Call options. With IVs at lower levels and the time decay not an issue for a week, we suggest buying at-themoney Calls in stocks like IDBI, Suzlon, RNRL, and Unitech.