CAPITAL PROTECTIONÂ ADVISED AHEAD OF THE BIG EVENT
Following indices /stocks should be protected with a downside side put as they look overbought on long term charts
|
Scrip(Lot size) |
RSI on monthly charts |
Recommended strike put |
| Nifty (50) |
          83 |
             7600 |
| Bank Nifty (25) |
          75 |
             15500 |
| LT (250) |
          84 |
             1700 |
| Tata Motor (1000) |
          77 |
             460 or 470 |
| Maruti (125) |
          81 |
             2600 |
| BPCL (500) |
          82 |
              600 |
| Crompton Greaves(2000) |
           84 |
              200 |
| GAIL(1000) |
           80 |
              460 |
| ONGCÂ (1000) |
           80 |
              400 |
The above strategy could be implemented for holders of the lot size (of stocks) indicated. Alternatively, investors holding stocks of lesser quantity not equal to the lot size, disinvestments ranging from 25-40 % of holdings could be considered.
Rationale:
What is RSI?
RSI is a relative strength oscillator, which gives an indication of the state of the market. Normally RSI exceeding 70-75 is taken as an overbought situation.
The market  has seen a stupendous run up since beginning of the year and we feel some correction could be round the corner. Keeping that in the background some hedging or part profit–taking could be considered around current levels. The indices as well as frontline scrip’s are trading at overbought levels and could see strong profit booking. Even if the up-trend were to continue the rise could well absorb the cost of the put options and still investors would benefit. For investors selling partly, they will still have the liberty of  enjoying any upside that may come about.
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.