The short-term outlook appears positive for the stock of Hindalco (₹684.5). Supports are at ₹662 and ₹622. A conclusive close below the latter will negate the positive trend.
Despite the positive outlook, we expect some moderation in price before pursuing upward. We expect the stock to move sideways with negative bias till the full Budget, which is expected to be in the third week of July.
F&O pointers: Hindalco July futures and June futures closed at ₹689.10 and ₹685.05 against the spot price of ₹684.50, signalling rollover of long positions. But the rollover ratio is 20 per cent, which is on the lower side. Option trading indicates that Hindalco could move in the ₹650-720 range.
Strategy: Consider a calendar put spread. This can be initiated by selling the current month 680-strike put and simultaneously buying the same strike of July expiry. These options closed with a premium of ₹7.50 and ₹22 respectively. This will cost ₹14.50/lot or ₹20,300 (market lot of 1,400 shares).
The strategy will yield maximum result if Hindalco holds above ₹680 in the current month series and starts falling from Friday. Exit the position if the loss mounts to ₹8,500. However, holding the position for at least three weeks can give better yield. If the prices hold at current level, we advise traders to book profit in the short put (June series) on Wednesday and hold the July contract for two weeks.
Follow-up: Bull call spread on Gail India might have triggered stop-loss.
Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading