Upside likely capped for HDFC Bank, say analysts

Mumbai: Traders mounted bullish bets on HDFC Bank futures on hopes HDFC's merger with the lender could lead to further upsides in the stock. Outstanding positions in stock futures of HDFC Bank touched the highest level in nearly a year on Monday but analysts are recommending traders tone down the near-term optimism.

"We don't see the stock going much beyond 1,700," said Rajesh Palviya, head-technicals and derivatives at Axis Securities. "The stock is likely to see stiff resistance around that level based on the call concentration, the maximum call writers are at 1,700 strike."

When traders write call options, it is a sign that they expect limited upsides from those levels.

During the day HDFC Bank's shares touched a high of ₹1,721.85, coming close to touching its all-time high of ₹1,724.30 hit last October. The rally in both the stocks led to 4% gains in Bank Nifty as traders squared off their bearish positions in the index futures.

Earlier on Monday, traders rushed to cover bearish positions and also added bullish bets on HDFC Bank. Options traders sold the 1,700 calls on HDFC Bank on Monday and sold the 1,600 puts.

"The immediate hurdle is around 1,700-1,800 even after uptick to near lifetime-high levels. The immediate support is near ₹1,585," said Chandan Taparia, derivative analyst at Motilal Oswal.

Open interest in HDFC Bank's April futures rose 2.57% on Monday. HDFC Bank's shares had gained 3.5% in the March derivatives series and HDFC had gained 2%.