Options data points to narrow range trading

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Highlights

Highest OI base at 17,400CE/17,00PE; India VIX falls 3.24% to 13.94 level

The options data on NSE is indicating a subdued narrow range of trading for the week ahead (September 13-17, 2021) as the resistance level declined by 600 points to 17,400CE, while support level moved up by 300 points to 17,000PE. Moreover, the offloading of Open Interest (OI) on both the Put and Call sides further holds indecisive undertone in the market. The 17,400 strike has the highest Call OI base followed by 17,500/ 17,600/ 18,000/ 17,800 strikes. Further, 17,500/17,800/17,450/17,650 strikes witnessed moderate offloading of Call OI positions. The 17,300 strike maximum Put OI followed by 17,000/17,350/ 16,900/17,200 strikes. The 17,350 has maximum Put OI, while other strikes 17,200/ 17,100/ 17,150/16,500 recorded drop in Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Nifty indices once again scaled to record highs in the week gone by as rally got supported by mid-cap and energy counters. Index surpassed 17,400 level during the week, however, could not manage to close above that. The moves during the week remained shaky as traders remained cautious ahead of the long weekend."

Nifty has the highest OI base at ATM 17,400CE. A move above this level is key for a fresh uptrend. On downsides, analysts expect 17,100 will remain an important support in the current consolidation phase.

"From derivatives front, Call writers were seen active at 17,400 strike, while Put writers added hefty Open Interest at 17,200 & 17,300 strikes. Implied Volatility (IV) of Calls closed at 11.43 per cent, while that for Put option, it closed at 12.12 per cent. The Nifty VIX for the week closed at 13.94 per cent. PCR of OI for the week closed at 1.56,"

The NSE Nifty closed the week almost flat in the absence of any major triggers. However, Indian indices continued to outperform global indices as European and US indices turned negative in the last week. Indian markets remained positive with midcap and smallcap indices gaining almost one per cent and two per cent respectively.

For the week ended September 11, 2021, BSE Sensex closed at 58,305.07 points, a gain of 175.12 points or 0.30 per cent, from the previous week's closing of 58,129.95points. Registering a modest gain of 45.65 points or 0.26 per cent, NSE Nifty ended the week at 17,369.25 points from 17,323.60 points a week ago.

Bisht forecasts: "From the technical front, secondary oscillators suggest that the market may remain choppy in upcoming week and may consolidate in a broader range of 17,200-17,450 levels. We keep our stance bullish for markets for upcoming sessions and suggest traders to use buy on dips strategy."

The banking sector may lead from here onwards, while technology stocks may see further consolidation after significant outperformance of the last couple of months. At the same time, metal, PSU stocks may witness further gains in the coming sessions. India VIX moved down 3.24 per cent to 13.94 level. The volatility index subsided last week as the Nifty consolidated in a narrow range and India VIX closed at its lowest level seen below 14 level. As per data from ICICI Direct.com, Nifty futures OI continues to rise, while current OI of almost 1.6 crore shares remains on the higher side. At the same time, FIIs' net longs also remained intact near 60,000 contracts suggesting ongoing positive bias. Buy on declines strategy should continue until FIIs hold long positions.

FII activity in the F&O space remained concentrated in the stock futures and index options space. With the Nifty trading near life-time highs, FIIs remained active in stock futures. FIIs were net buyers in index futures worth Rs82 crore, sold Rs2,840-crore stock futures and Rs4,365-cr index options during the week.

Bank Nifty

NSE's banking index closed the week at 36,683.20 points, a loss of 77.95 points or 0.21 per cent, from the previous week's closing of 36,761.15 points. "For Bank Nifty, the 37,000 level would act as a strong hurdle above which we could witness follow up buying into an index towards 37,500 level as well." For the coming week, the trading range for the index may expand as the highest Put base remains intact at 36,000 level, but the highest Call base has moved higher and is placed at the 37,500 strike. Analysts feel the bias remains positive and any dips towards its highest Put base would be an opportunity to create fresh long positions.

The current price ratio of Bank Nifty-Nifty has moved towards its yearly low level. Derivatives analysts predict some bounce from support level, due to which banking stocks may outperform. Volatility index remained muted near 14.5 level.

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