Range-bound trading with positive bias

The options data on NSE points to range-bound trading amid consolidation taking place as the resistance and support levels remained at the previous levels of 18,000CE and 17,000PE for a consecutive second week. The 18,000 strike recorded the highest Call OI followed by 17,500/ 17,300/ 18,500/ 19,000 strikes. Further, 18,000/17,800/17,500/17,600/17,100/17,500 strikes witnessed significant build-up of Call OI.

Coming to Put side, 17,000 strike has maximum Put OI followed by 17,100/16,200/ 16,000/16,800/17,200 strikes. 17,100/ 16,200/17,000/17,300/16,800 strikes recorded reasonable addition of Put OI. The Put-Call Ratio (PCR) for the May series was at 1.21.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, Put writers remained active at 17100 & 17000 strikes, while Call writers added hefty Open Interest at 17300 strike."

Call option writing is visible at ATM strikes, the Put base is placed at OTM 17000 strike. Positive consolidation may continue in the index, sustainability above 17400 is crucial for the uptrend to continue. Also, ahead of the LIC IPO, markets may trade with positive bias. OI addition indicates some of the longs have been carried forward to May derivatives series.

"Once again volatility gripped the Indian markets in the week gone by as NSE Nifty and Bank Nifty both went through a roller coaster ride," added Bisht.

For the week ended April 29, 2022, BSE Sensex closed at 57,060.87 points, a marginal drop of 136.28 points or 0.23 per cent, from the previous week's closing of 57,197.15 points. Registering a continuous fall of 69.40 points or 0.40 per cent, NSE Nifty ended the week at 17,102.55 points from 17,171.95 points a week ago.

Bisht forecasts: "For upcoming week, we expect markets to trade on a volatile path on the back of ongoing earnings season from the domestic front, while mixed cues from the global front as well. From the technical front, 16900-16800 zone is likely to act as strong support for Nifty while the 17300-17400 zone may cap any sharp upside in prices."

According to ICICIdirect.com, NSE Nifty began the May F&O series with one of the lowest ever OI with just 8.5 million shares. Moreover, the basis in the index is significantly low amid dividend expectations of almost 44 points. FII OI has declined sharply at the beginning of the series ahead of Fed meeting next week. FIIs are still marginally short, fresh accumulation of OI is likely to trigger fresh up move in the index. Put base placed at 17000 strike should remain crucial support for the index.

"May series begin on a negative note as selling pressure was observed in Friday's session across the board with Nifty seen ending the week above 17,100 mark, while banking index managed to hold 36,000 level on the local bourses," remarked Bisht.

The Nifty's rollover to May series was 78.14 per cent as against previous 82.12 per cent and three-month average of 77.99 per cent with a rollover cost of 15.3 points.

Bank Nifty's rollover was 84.76 per cent as against previous three-month average of 83.88 per cent. The market-wide rollover is at 84.76 per cent as against 87.37 per cent. Nifty Futures began the May series with an open interest of 1.29 crore shares versus 1.86 crore shares in OI.

As per data from Sharekhan.com, April series recorded a fall in Nifty as the index expired at 17,245 level with a loss of 1.26per cent. Bank Nifty closed on a flat note at 36,422 with minor gain of 0.13 per cent. On the open interest front, the Nifty saw an addition of seven per cent and is starting the April series on with 129.71 lakhs shares in open interest. The May series started with Rs210,0956 crore versus Rs 204,084 crore in stock futures, Rs. 22,389 crore versus Rs32,673 crore in Nifty futures and Rs765,009 crore versus Rs717,044 crore in index options and Rs20,22,241 crore versus Rs15,00,898 crore in stock options. India VIX on Friday rose 0.19 per cent to 19.42 level. The volatility index in April series was continuously inching higher as India VIX hovering at 20 per cent. Analysts advise derivatives investors to hedge against long positions.

"Implied Volatility of Calls closed at 18.45 per cent, while that for Put options closed at 19.89. The Nifty VIX for the week closed at 19.38 per cent. PCR of OI for the week closed at 1.70," said Bisht.

Bank Nifty

NSE's banking index closed the week at 36,088.15 points, a marginal decline of 43.40 points or 0.001 per cent, from the previous week's closing of 36,044.75 points.