F&O data holds volatile trading amid uncertainty

The resistance level for NSE Nifty, after hovering at 12,000 strike level for two weeks, moved upwards to 12,500 points for the week ended October 30, 2020. This is indicating a wider trading range for the week ahead.

The Nifty November month rollover was at 77.45 per cent as against the previous 70.63 per cent, three-month average of 76.05 and six-month average of 76.55 per cent. Bank Nifty November month rollover is at 73.59 per cent versus 79.05 per cent. The market-wide rollover is at 92.85 per cent versus 92.51 per cent.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, the 12,000 Call strike holds with maximum Open Interest which should act as strong resistance for Nifty.

On downside 11,600 level would be immediate strong support, below which further long liquidation can be seen. Call writers were seen adding hefty Open Interest in 11,700-11,800 & 11,900 strike as well. It indicates that any sharp upside would remain capped in the coming week."

The highest concentration of Call OI (23.60 lakh contracts) was at 12,500 strike, which also recorded maximum Call OI build-up of 11.28 lakh contracts, followed by 12,000 strike with 21.52 lakh contracts, 11700 strike with 16.78 lakh contracts and 11,900 strike with 15.29 lakh contracts. Further, 11600/11700/12050 strikes recorded reasonable Call OI addition.

Coming to Put side, the 10,500 strike, which registered maximum Put OI addition of 8.20 lakh contracts, witnessed highest Put OI of 15.58 lakh contracts followed by 11600 strike with 15.37 lakh contracts, 11000 strike with 15.08 lakh contracts and 11,500 strike with 14.87 lakh contracts. 10800/ 11,000/11300 strikes recorded significant Put OI addition.

"Indian Markets witnessed highly volatile moves in the week gone by and settled in a negative territory with loss of more than two per cent week-on-week. Nifty indices were trading in a broader range of 11,550-11,950 as tug of war among bulls and bears kept the markets shaky on back of mixed cues from global front," remarked Bisht.

For the week, BSE Sensex closed at 39,614.07, a net loss of 1,07.43 points or 2.63 per cent, as against 40,685.50 points. Similarly, NSE Nifty too fell by 287.95 points or 2.41 per cent and closed at 11,642.40 points from 11,930.35 points.

"We expect that volatility will grip the market in coming sessions as well on the back of US elections. The Implied Volatility of Calls closed at 23.39 per cent, while that for Put options closed at 25.12 per cent. The Nifty VIX for the week closed at 24.02 per cent and is expected to remain volatile. PCR of OI for the week closed at 1.67."

F&O October series concluded with eight per cent gain registering its fifth monthly rise in 2020 so far. The monthly derivatives series closed on a positive note in April, June, July, August and October.

On the rollover front, the Nifty began the new November series with 10 million shares against 8.5 million shares seen in the last October F&O series. The November series started with Rs98,189 crore as against Rs 90,264 crore and Nifty futures with Rs12,305 crore versus Rs9,096 crore. Index options recorded Rs1,26,614 crore versus Rs1,17,755 crore and stock options witnessed Rs27,518 crore versus Rs25,044 crore.

Bank Nifty

The Bank Nifty concluded the October F&O series with a sizable Put base of 24,000. The NSE's banking index closed at 23,900.90 points from 24,478.30 "From technical front, if Bank Nifty slips back below its 200 days exponential moving average which is placed at 23,600 levels on daily charts then further Sell off can't be ruled out which could drag the index towards 23,350 levels as well."

As the Bank Nifty began the November series at a discount, a short rollover was seen in the index, which is likely to keep the move in check. For the coming week, volatility is likely to remain high due to US elections.

Globally, Implied volatility (IVs) have risen sharply where India VIX also moved above 25 levels. Due to higher IVs, writing was seen in deep OTM strike indicating broader trading range for the coming week.

According to ICICI Direct.com, the roll spread in both the Nifty and Bank Nifty turned negative suggesting marginal short formation ahead of the US election output. The volatility index 'India VIX' rose over 25 per cent for the first time since July, while US VIX has moved towards 37 levels. Analysts forecast that volatility may continue to rise towards US elections.