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After rallying by 287 points from 4860 to 5147 level in six days after the Union Budget was presented, Nifty has been consolidating between 5090

and 5150 in the past four trading sessions. It is likely to find stiff resistance in the 5150-5180 zone and some profit-booking is likely to emerge soon, taking it lower to 5030 and then possibly 4950 level in the next few days. Only a sustained move above 5205 will indicate further strength in the index.

The cost of carry for Nifty March contracts surged yesterday and commanded a premium of more than 13 points towards the end of the session. The OI for the contract fell by a little more than 9 lakh shares, indicating that the late pull-back was more due to short covering. Reliance Industries, GAIL, Axis Bank and NTPC rose with a fall in OI, suggesting that the late spurt was due to short-covering and may not last for long.

We expect metal stocks to correct in the next few trading sessions and suggest avoiding leveraged long positions in stocks that have run up sharply. We recommend initiating bear spread strategy in Nifty by buying put option of strike 5200 at around Rs 80 and selling put option of strike 5000 at around Rs 25. It will be profitable if Nifty closes below 5145 on expiry. The maximum possible profit per lot is Rs 7,250 while the maximum possible loss per lot is Rs 2,750. 

article source: economictimes