Introduction

Banknifty behaving like a determined Tortoise staring at a Road block !

Author
By Rahul Ghose

Published on 30 Jun, 2021

Banknifty seems to be struggling like a determined tortoise, who wants to make sure that he shows to everybody that yes, i am Indeed the slowest ! Banknifty just refuses to cross the 36,000 mark ! it keeps struggling at the 35500 congestion zone !

In our last blog, we mentioned that Nifty’s all time high could be the start of a false bullishness and even though the markets could head to 16000, we must exercise caution at every step. If you notice, Nifty is constantly facing stiff resistance at the 15800-15900 band just like Banknifty is facing at the 35500 range. However having said that, we continue to accumulate Banknifty bees even at todays close price at 34800 for the medium term. We continue to hold a view that Banknifty will still look to outperform the Nifty and hence have continued to hold our pair trades in the same.

One data point is important to note : which is, the FII’s have been net sellers for 2 weeks almost now, the small buy days that have happened in between were to do with block deals and not actual buying. This coupled with the fact that we have not had any meaningful correction since the last all time high got taken out at 12400 makes us turn cautious.

Now coming to some talk on Positions ! We have created a ratio spread in Nifty with the 16000 and 16400 strikes. Britannia which we mentioned the last time round has worked well and has gone up 10% since our last blog. Reliance also jumped up to 2200 from 2000 which we mentioned the last time around as well. We are looking to enter some long straddles and long strangles this month owing to the extremely low VIX values. Banknifty weekly 8th July ATM is trading at a combined premium of only 750Rs(Something we’re looking at). Nifty 15600 and 16000 at and around 140 -150 Rs each for July end expiry with some far OTM offset units is another one.

We are also looking to start our SBIN accumulation once again closer to 400 and have also entered Rpower in the 2 days that it came out of uppercircuit. Phew ! thats a mouthful. Even though we mention all this here, its always good to do your own homework to understand the risks involved in the positions. And one Last for the road, Keep a close watch on Kotak and Hdfc bank, both have been laggards in the last leg of the rally !

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