- Short Nifty future with SL 4950.
- Buy equal quantity of Nifty 5000 call option & Nifty 4800 put option.
- Short CNXIT & Long Bank Nifty.
Persistent selling in the past 10 sessions by the FIIs helped trigger a collapse. It seems FII selloffs were tactical rather than outright panic exits. The technical picture appears quite negative. The fall is reinforced by breadth – declines far outnumber advances. It would be prudent to expect a slide till at least 4,650 levels.
The rupee has fallen in part due to FII selling, while the RBI has raised the CRR 75 basis points without touching policy rates. The CNXIT lost more ground than the Nifty and most IT majors appear weak. In the derivatives market, the February CNXIT futures settled at a small discount to underlying. Chances are, despite the favourable weak rupee, the CNXIT will lose more ground than the Nifty in the early stages of next week, at least.
Most bank majors appear capable of a further pullback and it is likely that the sector will outperform in the early stages of next week as well. The market may have been overly pessimistic about RBI's determination to cut liquidity and it is now correcting up.
Technically, the market could swing between 4,600 and 5,100 within the next week. February usually sees greater volatility due to Budget expectations as well.
-JK, Lead Associate, SLT