The sharp decline on Friday has changed the outlook to negative for the stock of IndusInd Bank (₹1,041.60). Support levels are at ₹990 and ₹807. A close below the latter will even change the long-term outlook to negative.

Immediate resistance is at ₹1,275 and only a close above ₹1,525 will change the long-term outlook bullish for the stock. Despite weak technical metrics, we expect the stock to bounce back in the short-term.

F&O pointers: Notwithstanding a sharp fall on Friday, the stock witnessed a healthy rollover of 35 per cent. IndusInd Oct futures closed at ₹1,042.80 and Nov futures at ₹1,048.10 against the spot close of ₹1,041.60. This indicates rollover of long positions to November series.

Strategy: Consider a calendar bull call spread, which can be initiated by selling the current month’s 1,000-call and simultaneously buying the next month’s same strike call. These options closed with a premium of ₹51.55 and ₹84.95 respectively. Thus, the net outflow will be ₹33.4/lot (₹16,700/lot). This will be the maximum loss.

However, profit potentials are very high, if the Oct call expires at zero and the stock rises after October 31. Exit the short (Oct Call) if the premium falls sharply. Hold the long position for at least two weeks. This strategy is only for the traders who can understand risk involved in shorting calls.

Follow-up: Despite the whole market being under selling pressure, stock of Infosys was relatively stable. However, the position would have been negative. Hold the position for one more week.

Note: The recommendations are based on technical analysis and F&O positions. There is a risk of loss in trading.

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