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Monday’s session turned out to be a sunny day for all the bulls as the benchmark index surged over 0.5% to 18,254.35, the highest level after January 2022. Banks are primarily supporting the market on account of their stellar Q2 FY23 earnings.
However, the market was also cheered looking at Britannia Industries Ltd’s (NS:) earnings performance in Q2 FY23. The company’s net profit rose to INR 490.58 crores compared to INR 381.84 crores in the same quarter last year. The profit jump was primarily on the back of volume growth as total revenue of INR 3,607.37 crores in Q2 FY22 increased to INR 4,379.61 crores in Q2 FY23 which is the highest quarterly revenue for the company so far.
Image Description: Daily chart of Britannia Industries with volume bars at the bottom
Image Source: Investing.com
The stock jumped to a 10% circuit limit to the day’s high of INR 4,184.60, by 9:50 AM IST which is a record high for the stock. The stock had been trading sideways since July 2022, as a fight between the bulls and the bears was going on. There was a time during this sideways range when the prices broke below key support of INR 3,600 on a closing basis and it looked like the bears were winning the fight.
However, this turned out to be a fake breakdown and the new entrants who went short at the breakdown were trapped in the next few days as the stock recovered. This was a whipsaw and there is no way to avoid such fake moves, although some filters can be applied to minimize them.
Coming to the current day, the stock didn’t give a single chance to short sellers to make an exit and surged to a new all-time high on the back of a massive volume of 1.36 million shares. This is the highest one-day volume since 4 May 2022 and over 480% up from the 10-day average volume of 232K shares (in less than an hour of trading).
Looking at the options chain data, CE sellers seem to have been badly trapped. All the CE strikes below 4,000 to 3,700 are seeing short covering as negative open interest is being witnessed. Due to less liquidity, many options are still pending to be executed at a fair price. This is the reason why I don’t prefer to make a naked options position (either long or short) in stock options.
Despite a strong trend, going long here is not short of risk as the move is huge and there could be a fair chance of retracement. If profit booking takes place and the stock falls back, it could take support around INR 3,900 which is a strong demand zone.
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