niftyji

The Nifty continued to trade in a range, as the index gave away some
ground, after surging to a fresh 30-month high in the previous trading
session. Implied volatilities have continued to remain subdued, too,
and now, with at-the-money, at just about 16%, is sitting close to
historical lows.

Historically, implied volatilities have, in general, tended to move
higher from the 16-mark. We think that there are few downside risks to
IVs from here on and volatilities are likely to inch higher in the
medium term. They, thus, provide excellent hedging opportunities,
wherein buying puts against long positions is very cost-effective at
the moment.

Overall, Nifty options data suggest stiff resistance for the index
around 5550 on the way up for the current series. One can expect the
stock-specific action to continue while benchmark indices should have
limited upside in the short term. The current series open interest PCR
has inched higher to 1.66 and again cautions of limited upsides on
the
Nifty from hereon. On the way down, the index should find a support at
5300 levels.

On a stock-specific basis, GAIL is our preferred large-cap pick and is
likely to do well with a target of 480 on the way up in the short to
medium term.