F&O data points to narrowing options band
Derivatives analysts forecast consolidation with positive bias
Barring 13,500 strike, there's no significant Call OI build-up at other strikes. After remaining at 12,500 strike for two weeks, the resistance level for NSE Nifty moved up by 500 points to 13,000 points as per the options data available on NSE after Muhurat trading for Samvat 2077 in a special session on account of Diwali on Saturday (November 14). Coming to futures and options (F&O) segment, the NSE Nifty surpassed most of its Call bases last week and tested almost 12,800 levels. For the coming weekly settlement, the index has a highest Put base at ATM 12,700, while highest Call base was seen at 13,000 strike. The noteworthy Call base is also visible at ATM 12700 Call strike. Hence, derivatives analysts forecast a consolidation with a positive bias more likely for the index in the coming week. However, a move below 12,500 may change the immediate bias for the NSE Nifty.
After scaling over 1,000 points in eight sessions, the NSE Nifty witnessed few signs of consolidation at higher strikes. The news about Covid-19 vaccine triggered an upward move across the globe markets, while risk assets received fresh inflows. Moreover, expectation of India's weight increasing in the emerging market index fuelled significant flows. The domestic markets recorded inflows of over Rs25,000 crore in the last two weeks. Going ahead, analysts forecast that the NSE Nifty will cool off marginally and consolidate for some time before finding a fresh directional trend.
The 13,000 strike has the highest concentration of Call OI (32.17 lakh contracts) followed by 12,700 strike with 18.58 lakh contracts, 13200 strike with 15.27 lakh contracts and 12,800 strike with 15.06 lakh contracts. The 13,500 strike recorded the highest addition of Call OI (5.03 lakh contracts. 13,200/13,150 strikes witnessed reasonable Call OI build-up.
12,700 strike has highest Put OI of 24.34 lakh contracts followed by 12,600 strike with 22.12 lakh contracts and 12,000 strike with 21.08 lakh contracts. The ITM 12,800 strike has maximum Put OI build-up of 5.18 lakh contracts, 12700 strike recorded addition of 5.15 lakh contracts and 12,650 strike witnessed Put OI build up of 3.64 lakh contracts.
Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "For upcoming week, we believe that bias is likely to remain in favour of bulls as far Nifty is holding above 12,600 levels. However, some volatility will remain in the index with wild swings. It advises traders to use any dip in prices to create fresh longs."
"On the derivatives front, Put writers added hefty Open Interest at 12,600 strike, while Call writers at 13,000 strike hold maximum OI," said Bisht.
"Indian markets gained for the second straight week with Nifty ended with gains of more than 3.5 per cent, while Bank Nifty witnessed gains of nearly six per cent on back of positive global cues. Index heavyweights like ICICI Bank, Axis Bank, Bajaj Finance and Eicher Motors remain in the list of top gainers," remarked Bisht.
For the week ended November 15, 2020, BSE Sensex closed at 43,637.98, a net gain of 1,744.98 points or 4.16 per cent, as against 41,893.06 points. Similarly, NSE Nifty too moved up by 516.70 points or 4.21 per cent and closed at 12,780.25 points from 12,263.55 points.
According to ICICI Direct.com, the Put-Call Ratio (PCR) rose significantly recently due to continued closure seen among Call strikes. Analysts expect some cool-off in the PCR ratio to be seen in the coming sessions. Moreover, there was a marginal increase in India VIX due to closure among Call strikes.
"The Implied Volatility of Calls closed at 16.70 per cent, while that for Put options closed at 17.06. The Nifty VIX for the week closed at 20.62 per cent. Put-Call Ratio of OI for the week closed at 1.53," added Bisht.
The NSE's banking index Bank Nifty closed at 28,594.30 points, a net rise of 1,795.35 points or 6.69 per cent from 26,798.95 points. Despite profit booking, Bank Nifty managed to close above 28,000 strike, while OI addition was seen at lower levels indicating positive bias for the banking stocks.
The Implied Volatility declined to below 20 per cent on the back of writing in OTM Call and Put strikes. Analysts feel that a consolidation is expected after a sharp up move in the past few weeks. As the overall bias for the index remains positive on the back of cash based buying as the index could find support near 27,500 points.