Options data holds wider trading range
Nifty records 50% surge in OI in current October series amid aggressive long positions
Options data is indicating wider trading range for the week ahead (October 12-16, 2020) as the highest concentration of Open Interest (OI) was at 12,500CE and 11,000PE. For the previous week ended October 2, the highest concentration of OI was at 11,450CE and 11,400PE. The NSE Nifty recorded addition of 50 per cent OI in the current October series as the aggressive long positions took place.
Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, once again short covering was seen by Call writers at 11,800 strike and Put writers seen shifting to higher bands, which suggest bullish momentum to remain intact in coming week as well."
The 12,500 strike, which also recorded maximum Call OI build-up of 11.29 lakh contracts, has highest Call OI of 32.57 lakh contracts followed by 11,900 strike with 17.79 lakh contracts, 12300 strike with 17.34 lakh contracts and 12,200 strike with 16.04 lakh contracts. Further, 12,300/12,100/11,900 strikes witnessed reasonable Call OI addition.
The 11,000 strike, which has maximum Put OI addition of 14.44 lakh contracts, recorded highest Put OI of 27.09 lakh contracts followed by 11,700 strike with 22.24 lakh contracts, 11500 strike with 20.69 lakh contracts and 11800 strike with 19.39 lakh contracts. The 11,900 strike recorded Put OI build-up of 11.15 lakh contracts, while 11,700/11500/11200/11800 strikes witnessed significant addition of Put OI. "Bullish momentum remained intact in Indian markets in the week gone by as the NSE Nifty surpassed 11,900 level, while Bank Nifty also closed above 23,800 level with gains seen in some of leading names like HDFC twins, ICICI Bank and Axis Bank. Nifty witnessed gains of more than four per cent, while Bank Nifty remained out-performer with gains of more than seven per cent week-on-week," added Bisht.
The NSE benchmark rallied 1,150 points in 10 sessions off the September low of 10,790 level, which hauled daily stochastic oscillator in overbought territory at 94. Thus, the possibility of temporary breather at the 12,000-12,100 range can't be ruled out, according to ICICI Direct.com. However, analysts said such breather should not be construed as negative as the broader structure remains positive. Instead, dips should be capitalized as an incremental buying opportunity in quality stocks amid ongoing Q2FY21 result season. For the week ended October 9, 2020, BSE Sensex further rose by 1,812.44 points or 4.68 per cent and closed at 40,509.49 points from the previous close of 38,697.05 points. Similarly, NSE Nifty gained 497.25 points or 4.35 per cent, to end the week at 11,914.20 points as against last week's 11,416.95 level. "The immediate hurdle for Nifty is placed at 12,000 level, while for Bank Nifty 24,000 to 24,400 zone is immediate resistance," forecasts Bisht. As per the data from ICICI Direct.com, on the weekly options front, continued option writing was seen at ATM & ITM Put strikes leaving limited downsides in the index. Currently, 11500 Put base shifted to 11,700 level, which should remain an immediate support. At the same time, volatility has moved below 19 levels after testing 23 in the penultimate week. The positive bias may continue in the broader markets till volatility doesn't move above 22 level.
"The Implied Volatility of Calls closed at 16.13 per cent, while that for Put options closed at 19.30 The Nifty VIX for the week closed at 20.38 per cent. Put-Call Ratio of OI for the week closed at 1.51, up from the previous week indicating Put writing," said Bisht. The NSE Nifty recorded a significant pullback as FPIs continued their buying support on positive global cues. FPIs bought Rs3,500 crore during the past one week as against their selling of Rs2,500 cr in September. This is indicating that FPIs turned bullish on the Indian markets. Analysts expect that FPIs may continue their buying support in the coming weeks.
Moving further up by 2,864.45 points or 13.65 per cent, Bank Nifty closed at 23,846.80 points as against the previous week's closing of 22,246 points. The banking index moved closer to its highest Call base of 24,000 strike. Analysts forecast the ongoing positive momentum may continue in the banking index as investors prefer buying opportunity on declines. "For upcoming sessions, we expect Bank Nifty to outperform the markets once again as from technical front Bank Nifty has managed to close above its 200 days exponential moving average on daily charts and given breakout above the same with marginally higher volumes," remarked Bisht.