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Where Nifty should head before Union Budget 2022

ICICIdirect Research 12 Jan 2022 DISCLAIMER

Commentary

The Nifty started the new year on an optimistic note and continued its ongoing momentum for the January series with broad based participation. Volatility remained elevated but no major spikes were seen before the Union Budget indicating the ongoing trend should continue. The cherry on the cake is that the rupee appreciated along with a sharp reduction in FIIs’ selling.

Major Option activity (Main expiry):

Major Call OI change in today’s session: 18500 (2.8 lakh), 18600 (1.5 lakh) and 18400 (-2.6 lakh).

Major Put OI change in today’s session: 18000 (4.5 lakh) and 17900 (1.2 lakh). 

Outlook:

In the current leg of the rally, the main contribution was from the BFSI space whereas other heavyweights like Reliance Industries, L&T and metals also provided support. For a few days, overall activity in the derivatives segment has increased significantly. Stability in volatility as well as the rupee along with inflows by FIIs in the January series has given confidence to the trader community. For the January expiry, highest Call base is still placed at 18000 levels but the Put base has shifted higher and aggressive writers are present in 18000 strike. We feel 17900-18000 remains the strong support zone whereas, on upsides, the Nifty is well placed to test 18500-18600 levels ahead of the Budget 2022. On the sectoral front, we feel banking and financials should lead whereas action is also expected in select auto, metals and chemical stocks.

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