F&O data holds narrow positive bias for Nifty

The resistance level for NSE Nifty moved up by 500 points to 14,500CE and support level rose by 200 points to ATM (At The Money) 14,200PE as per the options data available on NSE after trading hours on Friday (January 8, 2021).

Derivatives analysts see an immediate support for the index at 14,100 points. On the higher side, 14,500 strike holds the highest Call base followed by 14,300. Hence, a positive bias towards 14,500 is expected till the NSE Nifty holds 14,100 strike.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Put writers are continuously adding up hefty Open Interest at 14,100 and 14,200 strikes, which point towards limited down side in Nifty as of now.

On a flip side, Call writers are feeling uncomfortable at the current juncture as substantial shedding up of an Open Interest at 14,300 strike was seen. Call writers are seen shifting towards a 14,500 strike, which would act as an immediate hurdle from Nifty."

The highest concentration of Call OI (25.29 lakh contracts) was at 14,500 strike followed by 15,000 strike with 24.20 lakh contracts, 14,600 strike with 20.98 lakh contracts, 14,800 strike with 20.87 lakh contracts and 14,300 strike with 20.72 lakh contracts. Further, 14,800/14,600/ 14,350/ 14,700 strikes recorded significant build-up of Call OI, while 14,200/14,100/15,000 strikes witnessed offloading of Call OI.

Coming to Put side, the 14,200 strike, which also recorded highest build-up of Put OI (21.47 lakh contracts), has highest Put OI of 37.12 lakh contracts followed by 14,000 strike, which recorded Put OI addition of 11.50 lakh contracts, with 25.71 lakh contracts, 14100 strike with 19.91 lakh contracts, 14,300 strike, which has Put OI addition of 16.81 lakh contracts, with 19.71 lakh contracts and 13,800 strike with 18.80 lakh contracts.

For the week ended January 8, 2020, BSE Sensex closed at 48,782.51 points, a gain of 913.53 points or 1.90 per cent, as against 47,868.98 points. NSE Nifty moved up by 328.75 points or 2.34 per cent and closed at 14,347.25 points from 14,018.50 points.

For the week, the volatility index remained near 20 levels due to heightened volatility. With significant Put writing seen in the last couple of weeks, the Put-Call Ratio (PCR) rose substantially and any profit booking in the market may increase volatility levels towards 23. However, analysts hold caution if a move above 23.

Bisht forecasts: "Technical indicators suggest that markets are likely to witness intraday volatility in upcoming sessions with positive bias and remain in favour of bulls as far Nifty is holding above 14,000 levels broadly."

Sectorally, technology stocks should be in focus due to the third quarter results. Moreover, FII activity should also be kept under watch as the buying figure has reduced gradually in the last couple of weeks. "The Implied Volatility of Calls closed at 18.06 per cent, while that for Put options closed at 18.97. The Nifty VIX for the week closed at 20.62 per cent. PCR of OI for the week closed at 1.67 and it indicates more Put writing than Calls," added Bisht.

According to the data from ICICI Direct.com, in the F&O space, FIIs remained net buyers. However, their buying support has been declining. FIIs bought Rs 206 crore in index futures, Rs 1,291 crore in the stock futures and Rs 8,456 crore index options during the week.

Bank Nifty

The NSE's banking index Bank Nifty closed at 32,084.20 points, a net gain of 858.85 points or 2.74 per cent from 31,225.85 points. The Bank Nifty was struggling to move beyond 32,000 as Call writers are more active. However, in the last two sessions, bulls were dominating and it pushed the index above 32,000 suggesting further upsides.

The NSE's banking index recorded a long OI block of 23 per cent, which is the bottom for the week. Analysts forecast that it would turn as a base near 31,300 for the coming week. ATM strike of 32,000 followed by 31,500 strike saw decent OI blocks during the week. Bank Nifty has multiple supports at lower levels whereas on upside it could rally towards its Call base of 33,000 points.

The current price ratio of Bank Nifty-Nifty rose to 2.26 levels. On the back of outperformance in banking stocks, this ratio could further move higher towards 2.3 levels, observe derivatives analysts.