If NDA wins a majority, the sellers of the 11,000 call will be forced to cover their shorts which could catapult the market to new highs.
Near-month (May 31) options activity on Nifty indicates markets hitting a fresh high if NDA wins a clear majority (113 plus of 224 seats) in the upcoming Karnataka election. That would mean Nifty surpassing its January 29 record of 11,171.55 on or after May 15 when the results are out, believe derivative experts Rajesh Palviya of Axis Securities and Ashish Chaturmohta of Sanctum Wealth Management.
If the NDA manages to cobble a coalition, 11,035 becomes a strong resistance and markets could consolidate. If NDA loses, a knee-jerk correction to 10,430 levels isn’t ruled out from current 10718.
However, these calculations don’t factor in the possible impact of an oil spike from current $73/bbl or the benchmark govt bond yield crossing 7.8 per cent from the current 7.73 per cent. A spike in yields at home and in the US could queer the pitch for the markets, say analysts.
Markets currently have retraced 61.8 per cent from the March low of 9,958.55 to trade at 10,718 as of Wednesday. Fresh selling was seen Wednesday at the 11,000 strike call option for the current series. That took its open interest (OI) to over 60 lakh shares, indicating that big brokers and rich investors don’t think it would be easy for markets to surpass that level for now.
If NDA wins a majority, the sellers of the 11,000 call will be forced to cover their shorts which could catapult the market to new highs.
