Mkt still fretful amid heavy Call writing
F&O data points to undercurrent weariness;Marginal Put writing holds bulls on back foot; Unwinding in Open Interest in Nov series indicates some of the longs in Nifty have not got carried forwardto Dec F&O series
The significant addition of Call Open Interest (OI) and modest rise in Put OI hold undercurrent weariness with bearish bias for the week ahead (Nov 29-Dec3, 2021). The support level further fell by 750 points to 17,000PE and resistance level eased by 400 points to 17,500CE, according to the data from NSE.
The 17,500 strike has the highest Call base followed by 17,300/17,600/ 18,000/17,800 strikes. Further, the 17,500/ 18,100/ 18,000/ 17,800/17,400 strikes recorded significant Call OI. Interestingly, all the OTM and ITM strikes witnessed addition of Call OI. The heavy Call writing is indicating undercurrent bearishness in the market, observe derivatives analysts.
Coming to the Put side, the highest Put base is seen at 17,000 followed by 16,500/ 17,200/ 17,100/ 16,800/ 16,500 strikes. The 17,100/17,000/ 16,800/16,700 strikes recorded reasonable build-up of Put OI, while modest drop in Put OI is seen at 17,500/ 17,400/ 17,600 strikes.
Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, bulls were clearly seen on back foot as marginal Put writing was observed at 17,000 strike. On the flip side, Call writers added hefty Open Interest at 17300 & 17400 strikes."
Put writers were finding it difficult to hold their positions due to increased volatility and sharp declines. If Nifty breaches 17,000 level, then it may trigger downsides towards 16,700 in the coming sessions. On the higher side, sustainability above 17500 would be crucial for fresh upward bias, according to ICICIdirect.com.
"Indian markets witnessed a bloodbath in the week gone by, on the back of heavy selling by foreign investors amid renewed concerns pertaining to new variants of Covid," added Bisht.
For the week ended November 18, 2021, BSE Sensex closed at 57,107.15 points, a net gain of 2,528.86 points or 4.24 per cent, from the previous week's closing of 59,636.01 points. Registering a rise of 738.35 points or 4.15 per cent, NSE Nifty ended the week at 17,026.45 points from 17,764.80 points a week ago.
Bisht forecasts: "For upcoming week, we keep our stance bearish for Indian markets and advise traders to remain cautious. From technical front, Nifty has breached its 100 days exponential moving average on daily charts, which was placed at 17150 levels."
The November futures and options (F&O) series suffered a steep fall in Nifty as it nosedived to 17536 levels. Series-on-series, the Nifty closed with a loss of about four per cent and Bank Nifty suffered a heavy loss of seven per cent.
Nifty rollover to December series was 82.57 per cent against previous 82.31 per cent and the three-month average of 80.42 per cent.
During the November series, Nifty added five per cent OI and began the December series on a lighter note with 6.68 lakhs shares in OI. With unwinding in open interest it indicates some of the longs in Nifty have not got carried forward.
"Nifty indices started the December series with a negative impression and fell below 17000 mark as sharp correction was seen among heavyweight names like, Reliance Industries, HDFC twins along with metal and auto space," said Bisht.
According to sharekhan.com, for the November series, deep OTM 17,000 strike put option was highest in open interest with 82,099 contracts followed by 17500 PE with 54,277 contracts. While on the call side, the 18000 CE is highest in terms of open interest with 46,519 contracts followed by the 19000 strike with 38,026 contracts.
"The Implied Volatility of Calls closed at 13.40 per cent, while that for Put options closed at 14.80 per cent. The Nifty VIX for the week closed at 16.66 per cent and is expected to remain volatile. PCR of OI for the week closed at 1.3," remarked Bisht.
NSE's banking index closed the week at 36,025.50points, a net loss of 1,950.75 points or 5.13 per cent, from the previous week's closing of 37,976.25 points. The Bank Nifty recorded an addition of two per cent in OI with decrease in price indicating short build-up seen in the index. Bank Nifty witnessed a rollover of 83.76 per cent against previous month's 80.37 per cent and the three-month average of 80.98 per cent with rollover cost of 170 point. We feel that with a high rollover, Bank Nifty has seen short getting carried forward to the next series.