Higher Put base propelling pivot upwards

With the Put base shifting higher strikes, the 12,200 strike is likely to act as the fulcrum of the ongoing consolidation in the market.

Put base remained at 12,000 strike, and the higher concentration of options is seen at 12,200 strike which seems to be the pivot of the present consolidation.

The 12,300 strike has highest Call Open Interest (OI) of 22.04 lakh contracts followed by 12,250 strike with 12.02 lakh contracts, 12,200 strike with 11.67 lakh contracts and 12,400 strike with 11.25 lakh contracts.

Highest OI addition of 7.11 lakh contracts was seen at 12,250 strike followed by 12,200 strike with 5.51 lakh contracts.

Coming to Put side, the highest OI of 19.33 lakh contracts was seen at 12,200 strike followed by 12,000 strike with 15.37 lakh contracts and 12,100 strike with 14.27 lakh contracts.

High OI build-up of 4.26 lakh contracts at12,100 strike followed by 3.30 lakh contracts at 12,000 strike. "Indian markets remain volatile during last week on back of ongoing geopolitical tensions and weekly expiry.

From derivatives front, both Call and Put writers remain active during the week, which kept the Nifty in defined range of 12,150 to 12,300," observes Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd.

The NSE Nifty continued to consolidate at 12,200 level after a breakout from six-week consolidation at 12,050 level.

Derivatives analysts feel that investors not advised to expect quick returns as the market is eventually panning out more inclusive move with participation seen from midcap index.

For the week ended January 3, 2020, BSE Sensex closed at 41,464.61 points, a net loss of 110.53 points or 0.26 per cent, from the previous close of 41,575.14 points.

NSE Nifty inched down by 19.15 points or 0.15 per cent and closed the week at 12,226.65 points as against last week's 12,245.80 points.

"From technical front, however, the divergences on secondary oscillators are not suggesting any sharp upside to the index.

Though once again, we can expect some volatility and consolidation into the index at higher levels. The immediate support for the Nifty is placed in range of 12,150-12,100 zone, while major hurdle is placed at 12,300 levels.

For coming week any side decisive move beyond this range should gauge the further direction into the index," forecasts Bisth.

The Implied Volatility (IV) is reverting higher after seeing the sharp decline in the December F&O series. Analysts forecast possible hedged positions against long portfolios as the market moves towards expiry. This can add to the volatility higher.

"The Implied Volatility (IV) of Calls closed at 10.13 per cent, while that for Put options closed at 11.10 per cent. The Nifty VIX for the week closed at 11.49 per cent and is expected to remain volatile.

Put-Call ratio of OI for the week closed at 1.23. In coming week, we believe that markets are likely to remain volatile and for any sharp upside, Nifty (spot) needs to move above 12,300 level for further short covering towards record highs," added Bisht.

Bank Nifty

Suffering a loss of 343.1 points or 1.05 per cent for the week, Bank Nifty closed at 32,069.25 points as against 32,412.35 points.

According to the data at ICICI Direct.com, the January F&O series on Bank Nifty began with lower OI base as it recorded 10 per cent closure in OI whereas the premiums also declined from 190 points to 102 points which can be considered positive.

The ICICI Direct.com data further reveals that Call OI blocks in 32,500 strike along with depreciating Indian currency will keep the index move in check.

However, major OI blocks are seen at 32,000 and 31,700 Put strikes. These strikes will be major support in coming days.

Analysts feel the index may consolidate for the coming week and the contracting IV's will provide added advantage to option writers.

The current price ratio of Bank Nifty-Nifty eased to 2.62 due to higher crude oil prices and depreciating rupee.

Derivatives analysts further added that the Bank Nifty was trading on positive note due to stock-specific action and late buying in most of the PSU banks.

HDFC Bank and Axis Bank helped the index trade in positive zone, whereas Kotak Mahindra Bank witnessed delivery-based selling.