F&O Talk: 23,050 key Nifty support; Sudeep Shah outlines Tata stocks strategy, names 5 picks

The Nifty 50 index is treading cautiously after setting a new record high of 23,110, with market participants bracing for turbulence ahead of the general election results on June 4. The India VIX, a key gauge of market volatility, has surged approximately 90% in May, reflecting heightened uncertainty. According to analysis from Sudeep Shah, Head of Technical and Derivatives Research at SBI Securities, the index's ability to hold the 23,050 level is now critical for its short-term trajectory.

Technical Levels to Watch

The immediate support for the Nifty is pegged at 23,050. A decisive break below this mark could trigger a market correction, pulling the index towards the 22,900-22,850 zone. On the upside, the first hurdle is at the 23,200 level. Surpassing this resistance could pave the way for a continued rally toward new highs in the 23,400-23,500 range. The current market structure suggests a period of consolidation before a clear directional move emerges post-election.

An Options Strategy for High Volatility

The elevated VIX environment has created opportunities for options sellers who can benefit from high premiums and time decay. A suggested non-directional strategy is a Short Strangle for the June 6 expiry. This involves simultaneously selling an out-of-the-money 23,500 Call option and a 22,500 Put option. The strategy is designed to profit if the Nifty remains between the break-even points of 22,060 and 23,940 upon expiry. The maximum profit is capped at the net premium received, but traders must be aware of the unlimited risk if the market makes a significant move beyond this range.

Stocks in Focus

Technical analysis has identified several stocks exhibiting bullish patterns. Within the Tata Group, Tata Motors shows a bullish flag breakout, while Tata Power has broken out from a symmetrical triangle pattern. Tata Communications is showing signs of a reversal from its 200-day exponential moving average (EMA). Beyond the conglomerate, Coromandel International has registered a cup and handle pattern breakout, and IT firm Coforge has seen a breakout from an ascending triangle, signaling potential upside.