F&O Talk| Bull run expected to continue in Nifty, dips may present opportunities for fresh buying: Chandan Taparia of Motilal Oswal

The 50 component index Nifty50, ended the week by closing near its upward-moving channel. The index closed at 23,465, after making a new all-time high on Friday. On the other hand, Bank Nifty is still somewhere in the middle of its upward channel, giving a close at 50,002.

As the indices inch towards newer highs, ET Markets interacted with analyst Chandan Taparia, Senior VP, Equity Derivatives & Technicals, Broking & Distribution at Motilal Oswal, regarding his views on Nifty and Bank Nifty along with an index strategy for the upcoming week. Following are the edited excerpts from his chat:

The markets have been heading upwards swiftly, recovering the dips of the election outcome day. Do you expect a steady and gradual up move in the indices now in the near future? Or is it likely to proceed with its existing swiftness?

The Nifty Index has moved by 4,650 points in the last nine months (recovered by 2,200 points in the June month itself) and any hiccups have been absorbed by the retail infusion despite continuous selling by the FIIs. It has been trading in an upward sloping channel and expected to continue this bull run. India VIX has significantly cooled off from its highs giving comfort to the overall sentiments. As of now till Nifty holds 21,800 zones, ongoing momentum can extend towards 24,000-24,500 zones with decent buying in many outperforming sectors.

In the last week, the FIIs remained net short on the index futures, however, the number of contracts declined. Do you think this is the time they were waiting for, to come back?

The political picture is clear and stable in India after the election results and the development growth story is intact. The magnitude of selling has decreased significantly in the last few sessions as FIIs long short ratio has improved from 12.75% to 46.34% in a matter of seven sessions which indicates a potential upside as witnessed historically. Volatility has fallen from its recent top of 30-31 and now quoting below 15 zones, FIIs usually turn back in the developing market where volatility is lesser with political stability so expecting them to back soon to drive the next leg of rally in Indian market.How do you read the current DII positioning? Previously, when FIIs were net short, DIIs were net long. But this week’s DII data indicates mixed sentiments. What does this mean?

DIIs are still standing at net longs and have supported the market by consistently buying from the last eleven months.

What does the Bank Nifty’s OI data indicate for the upcoming week?

Bank Nifty OI has increased by 18% in this series so far with a price rise by 2% which indicates longs are adding in this index.

As per the technical placement, Nifty seems to be near the resistance of the upward channel and also quite above from its moving averages. Do you think now is the time when the price might retrace from the resistance to test the averages?

I don’t think that price will retrace much from current zones as we have already seen a correction on election result day and that was bought swiftly and smartly which clearly shows strength and bargain buying power of Indian retail and DIIs. I believe that by chance if any decline happens that could be the best opportunity to add more positions in the Indian equity market.

If the above case is true, how can one hedge against the risk of fall in prices?

This case is less likely but hedging can be done to avoid any unforeseen event. One can initiate a bear put spread by keeping in mind that the next volatile trigger could be the Budget session of the newly elected government.

Any stock recommendations that you might have for the upcoming week?

Positive view on Capital Goods (ABB, Siemens, Cumminsind), Auto (M&M, Motherson, Escorts), Shipping (Cochinship, Mazdock, GRSE), Defence (HAL, BEL, Paras), Pharma (Glenmark), Consumption (Indigo, Trent, ABFRL)

Do you have any strategies or levels to play on Bank Nifty in the coming week?

Bank Nifty needs to continue to hold above 50,000 zones for an up move towards 50,500 then 51,000 zones whereas on the flipside, supports are placed at 49,500 then 49,000 zones.

Does the PCR data currently indicate any positions in Nifty?

Nifty PCR has improved from 0.73 to 1.30 in the last nine sessions which indicates that put writers are creating a base in the market.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)