Options data holds undercurrent buoyancy

Indicating undercurrent buoyancy in the market, the resistance level jumped by 1,100 points to 18,500 level, while support level eased by 300 points to 17,000 points. The latest futures and options (F&O) data on NSE is pointing to wider trading range for the week ahead (September 20-24, 2021).

The 18,500 strike has the highest Call OI followed by 18,000/ 17,800/ 17,600/ 17,700 strikes. Further, 18,500/ 18,400/ 18,000/17,800/17,600 strikes witnessed significant build-up of Call OI.

Coming to the Put side, the 17,000 strike has a maximum Put base followed by 17,000/ 17,500/ 17,200/ 16,800/16,500 strikes, while 17,600/ 17,400/ 17,000/16,800 strikes recorded moderate addition of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, now the 17,800 level would act as an immediate hurdle for Nifty as Call writers were observed adding hefty Open Interest there."

"Bulls once again seen active during last week in Indian markets as Nifty and Bank Nifty both the indices marked their record highs on local bourses. Nifty surpassed 17,700 level, while Bank Nifty clinched above 38,000 level in intraday trades. However, traders keen to book profits at higher levels ahead of the weekend as both the indices gave up some gains in Friday's session," further adds Bisht.

For the week ended September 17, 2021, BSE Sensex closed at 59,015.89 points, a gain of 710.82 points or 1.21 per cent, from the previous week's closing of 58,305.07 points. Registering a gain of 215.90 points or 1.24 per cent, NSE Nifty ended the week at 17,585.15 points from 17,369.25 points a week ago.

Bisht forecasts: "From technical ground, Nifty is now in the 17,400-17,250 zone and would act as a major demand zone. Bulls once again seen active during last week in Indian markets as Nifty and Bank Nifty both the indices marked their record highs on local bourses.

Nifty surpassed 17,700 level, while Bank Nifty clinched above 38,000 level in intraday trades. However, traders keen to look book profits at higher levels ahead of the weekend as both the indices gave up some gains in Friday's session. However for Nifty now 17,400-17,250 zone would act as a major demand zone."

As per the ICICI Direct.com, the current up move has put Call writers on the block and positions were moved to deep OTM strikes towards 18,000 points. Despite significant writing at ATM and OTM Call strikes on Friday, analysts expect that till major Put bases are not breached, one should remain positive. During the last couple of weeks, Put writers continued to strengthen the base. For the coming weekly settlement, the 17,400 strike holds noteworthy Open Interest.

The volatility index India VIX moved up 5.69% to its highest level in the last three months to 15.23 level. As the key indices are hovering at record highs, the steep rise in the volatility index ahead of the FOMC meeting next week may induce some profit booking in the coming sessions. Hence, investors are advised to hold long positions above 17,400 level.

"Implied Volatility (IV) of Calls closed at 12.22 per cent, while that for Put options closed at 12.47 per cent. The Nifty VIX for the week closed at 14.41 per cent. PCR of OI for the week closed at 1.56."

Analysts expect the volatility may continue to rise in coming days due to which the trading range would increase in indices and sharp moves being expected on both sides.

FIIs remained as net buyers in the secondary market during the last week. In the F&O space, FIIs concentrated in the stock futures and index options space. FIIs bought index futures worth Rs82 crore and sold Rs2,840-crore stock futures and index options worth Rs4,365 crore during the week.

Bank Nifty

NSE's banking index closed the week at 37,811.95 points, a loss of 1,128.75 points or 3.07 per cent, from the previous week's closing of 36,683.20 points.

"The charts look very positive at current juncture as Bank Nifty has managed to give a breakout above its key hurdle of 37,000 levels. On the downside, as Bank Nifty holds above 37400 to 37200 zone, the bias is likely to remain in favour of bulls," observes Bisht.

Due to high volatility, the option OI is placed from 36,500 to 38,500 strikes. However, major Put OI writing observed in 37,000 strike followed by 37,500, according to data from ICICI Direct.com, which predicts that Bank Nifty may head towards 39,000 as money flow is likely to see from IT and metals to banking.

The current price ratio of Bank Nifty-Nifty reverted from its yearly low. The outperformance in banking stocks should continue for a couple more days.