TCS April futures OI soars to 6 month high

Mumbai: Open interest in Tata Consultancy Services’ current month futures is at the highest in six months, as traders mount bullish bets on the IT major ahead of its March quarter results announcement on Monday.A strong earnings outlook for the IT sector has prompted traders to add long positions, pushing the open interest higher. TCS is expected to maintain its leadership in the IT space in terms of margin expansion and revenue growth, driven by large deals such as with Postbank and Prudential Financial. As the stock has already run up 9 per cent in the last month, traders are recommending a bull call spread to play the results.TCS shares ended 0.2 per cent higher at Rs 3,322.20 Friday on the BSE, after hitting a record high of Rs 3,358.80. It has gained 18 per cent in the last six months and 88 per cent in the past year.Analysts are recommending the bull call spread to reduce the cost of the premium, as they do not want to take a directional trade given that the stock has already run up significantly. The outlook is bullish.Rajesh Palviya, head-technicals and derivatives at Axis Securities, recommends buying at the money call of 3,350 at Rs 90 and sell call of 3,500 at Rs 40. “The net outflow would be Rs 50 and that would also be the maximum risk. If the stock rises above Rs 3,400, we would be in profit,” said Palviya. “If IT stocks continue to be favourable, then TCS may rise to Rs 3,500 also. I feel IT stocks will support the market from here. The maximum profit would be at Rs 3,500.”Concurring Palviya’s view, Chandan Taparia, a derivative analyst at Motilal Oswal, said the stock could head to the Rs 3,500 levels till it held above Rs 3,235. “...one can go with bull call spread by buying 3,300 call and selling 3,500 call by paying a premium cost of 76 points which is a cost of 2 per cent to play the upside move towards the 3,500 zones,” said Taparia.

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