Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,940.1055.6
Stock Analysis, IPO, Mutual Funds, Bonds & More

Nifty poised to hit new highs after RBI policy: Analysts

FPIs tend to be net buyers of index puts as a hedge to their portfolios.

, ET Bureau|
Jun 05, 2019, 08.29 AM IST
0Comments
MUMBAI: The Nifty could move in a 700-point band after the RBI policy on Thursday, with odds currently in favour of an upside after the event. This could propel the Nifty to test its recent record high of 12,103.05, said derivatives analyst.

The extent of the upside hinges on RBI changing the monetary policy stance to accommodative from neutral or cutting rates by greater than the 25 basis points baked into Tuesday’s closing price of 12,022. However, chances of profit booking increase if the rate is cut by 25 bps or the stance is left unchanged, said derivatives analysts.

The range is based on the price received by an option seller of a 12,000 straddle – combination of a 12,000-strike call and put – expiring on June 27. That price was at a provisional Rs 338 per share (75 shares make a lot) at Tuesday’s close of 12,022. This pegs the upper band at 12,360 and the lower band at 11,684, a 676-point range.

The bullish sentiment is borne out by the open interest put call ratio (PCR) of the Nifty options expiring on June 27. At Tuesday close, this was 1.44, implying sellers have sold more puts than calls on odds that markets would remain steady or rise, enabling them to pocket much of the premium paid by option buyers.

Also, apart from traders, FPIs tend to be net buyers of index puts as a hedge to their portfolios.

Rajesh Palviya, derivatives head at Axis Securities, expects the market could test a new high after the policy. The Nifty made a record high of 12,103.05 on Monday. “Thereafter, the market will wait for further cues from the Budget.”

Also Read

Debt mutual fund managers react to RBI policy

RBI policy: Why repo rate cut failed to cheer

RBI policy: status-quo for debt mutual fund investors?

RBI Policy: Analysts see room for more rate cuts to boost economy

Sensex, Nifty fall for 4th day ahead of RBI policy decision

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service