- Despite testing life highs during the week, Bank Nifty closed the week marginally negative as consolidation near 44,000 continued for the fourth straight week. Private sector heavyweights came under pressure while gains in PSU banks compensated for them. Going ahead, we expect Bank Nifty to find support near 43,500 levels below which weakness may be extended in the short-term.
- Bank Nifty open interest remained quite low despite marginal increase seen during the week. Continued outperformance from the banking space in the last 2 months might have triggered profit booking in the banking space. In such a scenario, declines towards 42500 levels may act as a good entry opportunity for the index.
- From the weekly options front, both Call and Put open interest is concentrated at ATM 44,000 strike with cumulative premium of nearly 500 points. Ahead of RBI monetary policy, we can expect Bank Nifty to remain subdued and consolidated above 43,500 levels below which Bank Nifty may retrace towards 42,500 levels. We believe that closure among Call strikes is crucial for the upsides to find momentum.
- As we are keeping our view of moderate bearish, hence we advise traders to go for long Put spread options strategy, where the maximum loss for the trade would be |3700. While strategy will be in maximum profit if the expiry comes below 43600 levels.
(The author is Analyst – ICICI direct)