F&O data points to volatile trading

The truncated week (Christmas holiday on December 25) witnessed a Black Monday and subsequent V recovery in the following three sessions. After the trading hours on December 24, the support level remains at 13,700 strike and resistance level eased by 200 points to 13,800 strike when compared with the previous week.

Highest concentration of Call OI (45.04 lakh contracts) was seen at 13,800 strike, which also recorded maximum Call OI addition of 14.13 lakh contracts, followed by 14,000 strike with 28.10 lakh contracts, 13750 strike with 24.50 lakh contracts and 13,900 strike with 21.04 lakh contracts. 13,850/13,750/13,900 strikes witnessed reasonable build-up of Call OI. Significant offloading of Call OI was seen at 13,700 /13,600/ 13650 strikes.

Coming to Put side, 13700 strike, which also witnessed maximum addition of Call OI (27.22 lakh contracts) recorded highest Put OI addition of 31.91 lakh contracts followed by 13,000 strike with 30.23 lakh contracts, 13500 strike with 27.70 lakh contracts and 13,600 strike with 26.22 lakh contracts. 13,750/13.650/ 13,600 strikes recorded significant build-up of Put OI.

"From derivatives front, both Call writers and Put writers were seen active during the week. Put writers were seen adding hefty Open Interest at 13,500 & 13,600 strikes, while 13,800 & 13,900 Call strikes also witnessed immense build-up of Open Interest in the weekly contracts," observes Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Limited.

The NSE Nifty recovered sharply from its sharp decline of almost 600 points seen on Monday and closed the week near the highs on unabated FII inflows albeit at a reduced pace. The December derivatives series witnessed inflows of more than Rs 56,000 crore as on December 24, making it in line with inflows in November.

"Highly volatile moves were seen in the Indian markets during the past week as the Nifty index slipped towards the 13,150 level from its record highs, on the back of profit-booking at higher levels. However, once again, bulls made a comeback in the later half of the week as Nifty almost took a V shape recovery to inch above the 13,700 mark as the IT sector, along with the pharma and banking counters, supported the up move," said Bisht.

For the week, the key indices closed almost flat, while the rest of the indices registered marginal losses as a deep cut was seen in the first session of the week. BSE Sensex closed at 46,973.54 points on December 24, 2020, a miniscule gain of 12.85 points or 0.027 per cent, as against 46,960.69 points on 18. However, NSE Nifty inched down by 11.3 points or 0.082 per cent and closed at 13,749.25 points from 13,760.55 points.

Bisht forecasts: "From the technical front, secondary oscillators suggest that volatility is likely to grip the markets in coming sessions. On the higher side, the 13,800 level would act as a strong hurdle for Nifty."

India VIX tested the high of the 24 level on Monday and closed the week eight per cent higher above the 20 level. Considering the high volatility in the last week, fresh upsides in volatility may cause some weakness in the coming sessions.

"The Implied Volatility of Calls closed at 19.32 per cent, while that for Put options closed at 20.37. The Nifty VIX for the week closed at 20.50 per cent. Put-Call Ratio of OI for the week closed at 1.57 and it indicates more Put writing than Calls," remarked Bisht.

Though FIIs, in the F&O space, remained net buyers, the trading activity declined considerably. FIIs sold worth Rs 1,251 crore in index futures, bought to the tune of Rs 2,509 crore in the stock futures and worth Rs 4,803 crore index options during the week.

Bank Nifty

The NSE's banking index Bank Nifty closed at 30,402.20 points, a net decline of 312.45 points or 1.017 per cent from 30,714.65 points. Beginning the week on a sluggish note, the Bank Nifty corrected nearly 1,500 points on Monday. It was one of the sharpest falls seen in the past few weeks. However, the NSE banking index recorded a V-shaped recovery and managed to close near 30,400. Among the banking heavyweights, Axis Bank, Kotak Mahindra Bank and SBI stocks witnessed buying support. Among the mid-cap stocks, Federal Bank and IndusInd Bank performed well. Volatility remained choppy along with addition in OTM options indicating possible consolidation in coming days.

F&O Trading