Nifty 50 (24,039) and Nifty Bank (54,664) appreciated 0.8 per cent and 0.7 per cent respectively over the past week. This was in line with how futures contracts of both indices performed. Overall, the derivatives data continues to indicate a bullish bias. Here’s an analysis.
Nifty 50
The May Nifty futures (24,139) advanced 0.8 per cent last week and saw its outstanding Open Interest (OI) more than quadruple to 117.4 lakh contracts. This shows considerable long build-up and a healthy roll-over of buys from April expiry.
While the Put Call Ratio (PCR) for the nearest weekly expiry stands at 0.70, a bearish sign, the ratio for May and June monthly contracts, at 1.4 and 1.3 respectively, are above 1, showing positive bias. Therefore, any weakness in the index can be short-lived.
The chart of Nifty futures (May), too, remains positive. Although it saw a decline in the second half of last week, it stays above key trend-defining support levels at 24,000 and 23,600. As long as the latter holds true, the bulls will be comfortable.
A rally, either from the current level or after a moderation to 24,000 or 23,600, can take Nifty futures (May) to 24,800 and 25,000. But if the contract slips below 23,600, the outlook can turn weak temporarily where the price can drop to 22,900.
But as it stands, the bulls are in a good position and possess the strength to take Nifty futures to higher highs.
Strategy: Go long on Nifty futures (May) at 24,000 and on a dip to 23,700. Place initial stop-loss at 23,500. When the contract rallies to 24,400, revise the stop-loss to 24,150. Lift the stop-loss further up to 24,250 when the contract hits 24,600. Exit at 24,800.
Alternatively, one can consider 24500-call of May expiry which closed at ₹284.10 on Friday. Buy if the premium drops to ₹205 and ₹150. Place stop-loss at ₹100. When the premium rises to ₹350, revise the stop-loss to ₹250. Book profits at ₹430.
Nifty Bank
The May Nifty Bank futures (54,724) was up 0.8 per cent last week. Along with this, the outstanding OI nearly quadrupled to 24.2 lakh contracts, showing strong long build-up and good long roll-overs from last expiry.
The PCR of May expiry options stood at 1 on Friday whereas for June expiry, it stood at 1.60. So, overall, there is a bullish tilt. The same goes with the chart of futures contract.
Early last week, Nifty Bank futures (May) touched a record high of 56,077 (the underlying Nifty Bank index made a fresh life-time high of 56,098.70 on Wednesday) before seeing a drop in the second half of last week.
There is a chance for the contract to see an extension of the downswing to the 53,600-53,800-price band. However, we expect Nifty Bank futures to eventually regain upward momentum and rise to 57,000 in the short term. Resistance above 57,000 is at 58,000.
But in case the contract breaches the support at 53,600, it might extend the drop to 52,800 and 52,500. That said, given the prevailing price action, we can assume that the support at 53,600 can hold and help trigger another leg of upswing.
Strategy: Buy Nifty Bank futures (May) at 54,300 and on a dip to 53,700. Target and stop-loss can be 57,000 and 53,150 respectively.
Otherwise, traders can buy May expiry 55500-call, whose premium was at ₹757.70 on Friday close. Go long at ₹580 and ₹325. Keep stop-loss at ₹150. When the price of the option goes up to ₹1,200, raise the stop-loss to ₹900. Exit at ₹1,700.
Published on April 26, 2025
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