Options data points to higher support levels
Call writers turn aggressive; Sharp unwinding of Put OI seen in 11,600-11,450 range
Resistance and support levels moved upwards by 500 points range when compared to the previous week as highest Open Interest (OI) concentration is seen at 12,500CE/ 11,000PE from 12,000CE/ 11,500PE a week ago. Call writers are becoming aggressive, while sharp unwinding of Put OI is seen in 11,600-11,450 range.
With Options maximum pain hovering at 11,400 points, the 12,500 strike recorded highest Call OI of 30.92 lakh contracts followed by 12,000 strike with 26.62 lakh contracts, 11500 strike, which registered maximum Call OI addition of 14.11 lakh contracts, with 24.07 lakh contracts and 11600 strike with 23.23 lakh contracts. 12,000/12,500/ 11,500/11,400 strikes recorded significant Call OI build-up.
Comint to Put side, 11,000 strike, which has maximum Put OI build-up of 8.88 lakh contracts, recorded highest Put OI of 20 lakh contracts followed by 10,500 strike with 14.83 lakh contracts, 10800 strike with 14.31 lakh contracts, 10700 strike with 12.74 lakh contracts and 11300 strike with 13.86 lakh contracts. Further, 10,800/10,700 /10,500 /11,300 /11,1000 strikes recorded significant Put OI
addition. Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers added hefty Open Interest at 11500 & 11600 strike, while Put unwinding was observed at 11,300 strike. The maximum Option Pain for current week and monthly expiry is at 10,400, which will consider as key level and in coming sessions this level will act as resistance for the market.
Long buildup is seen in Maruti, PVR, Siemens, Ashok Leyland, Nestle, Biocon and TCS, while long unwinding took place in SBI, Tata Steel, Hindalco, Adani Ports and Sail. stocks such as ICICI Pru, Tata Power, Coal India, HDFC, Divi's Lab, Jindal Steel, etc, recorded short build-up positions, while short covering took place in Zee, Escorts, PVR, Bandhan Bank, Bosch Ltd, etc.
Bisht stated that "After two weeks of stunner rally, Indian markets took a breather last week with bears made a comeback as Nifty ended the week with loss of nearly 2.70 per cent, while Bank Nifty also witnessed sharp selloff at the end of the week below 23,100 mark."
For the week ended September 4, 2020, Sensex shed 1,110 points or 2.81 per cent, a worst week since May, and closed at 38,357.18 points from the previous close of 39,467.31 points. Similarly, NSE Nifty eased by 313 points or 2.69 per cent, to end the week at 11,333.85 points as against last week's 11,647.60 level. "From the technical front, secondary oscillators suggest that market may trade in a range bound manner with Nifty likely to consolidate in range of 11,200 to 11,500 levels. However, volatility will likely to grip the markets as tug of war among bulls and bears will continue in coming week as well," forecasts Bisht.
Barring index options, all the segments witnessed sell-off by FIIs and DIIs. FIIs bought Rs65.03 worth index options, while sold to the tune of Rs1,888.78 crore in cash segment, Rs696.11 cr in index futures, Rs603.26cr in stock futures and Rs22.36 cr in stock options. Put-Call Ratio (PCR) for Nifty was 0.7051 and for Nifty PCR volumeis hovering at 0.831. The volatility index, India VIX, rose over seven per cent to 21.95 level.
"The Implied Volatility (IV) of Calls closed at 19.17 per cent, while that for Put options closed at 21.22. The Nifty VIX for the week was closed at 22.15 per cent and is expected to rise further. PCR OI for the week closed at 0.71 down from the previous week indicating fresh Call writing," remarked Bisht.
As the moratorium period concluded with August, banking stocks suffered the most during the last week. Recovering by 2,224.2 or 9.97 per cent for the week, Bank Nifty closed at 23,011.50 points as against the previous week's closing of 24,523.80 points. Option maximum pain is at 23,200 strike. 23,000 strike has highest concentration of Put OI and 23,500 strike has highest Call OI. Bank Nifty PCR of volume is at 0.9628 and PCR at 0.702.