Range-bound trading may favour bulls

Range-bound trading may favour bulls
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Range-bound trading may favour bulls

Highlights

FIIs trim long positions in index futures; India VIX declines 2.34% to 15.75 level; Traders are advised to keep stock specific-action on radar

The resistance and support levels remained at 18,000CE and 17,000PE respectively for the second week in a row, while the narrow gap between highest Put base and Call base continued. This indicates choppy sessions for the week ahead (November 8-12); however, the bias is likely to remain in favour of bulls, observe derivatives analysts. Nifty may consolidate in the broader range of 17600-18100 with stock-specific activity for the week.

The 18,000 strike has the highest Call OI followed by 18,300/18,500/ 18,400/ 18,100 strikes. Further, moderate Call OI build-up is seen at 18,300/ 18,400/18,500 strikes.

Coming to the Put side, maximum Put OI is at the 17,000 strike followed by 17,500/ 17,700/ 17,900 strikes. 17,000/ 17,400/17,500/17,700 strikes recorded moderate to reasonable addition of Put OI.

The first truncated week of the November F&O series was lacklustre ahead of the US Fed outcome. The last week of October series recorded profit taking. Despite positive US equities, domestic markets remained under pressure at higher levels.

The NSE Nifty November began with little over 10 million shares, lower than the average of the last couple of months. Last week, there was no major movement in options trading as the derivatives segment witnessed lower Open Interest. Furthermore, as the NSE Nifty has breached its major Put base of 18000 and October series VWAP of 18100. These levels should act as immediate hurdles on the higher side. Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Once again a tug of war was seen among options writers during the week. Call writers added hefty Open Interest at 17,900 & 18,000 strikes, which would likely act as a strong hurdle for Nifty in upcoming sessions. On the downside, the 17,800-17,650 zone would act as a strong support area." "Nifty indices ended lower on the last day of Samvat-2077 as selling pressure mounted on auto and banking counters," adds Bisht.

For the week ended November 5, 2021, BSE Sensex closed at 60,067.20 points, a net recovery of 760.27 points or 1.28 per cent, from the previous week's closing of 59,306.93 points. Registering a gain of 245.15 points or 1.38 per cent, NSE Nifty ended the week at 17,916.80 points from 17,671.65 points a week ago.

Bisht forecasts: "From technical front, however, Nifty has managed to close above its 100-day exponential moving average on daily charts. We expect markets to remain choppy in coming sessions with bias likely to remain in favour of bulls. Traders are advised to keep stock specific-action on radar."

India VIX declined 2.34 per cent to 15.75 level. Volatility index tested its monthly high near 18 per cent before closing the week below 16 level on the back of closure among Put writers. Looking at elevated IV market participants should remain cautious at higher levels.

"Implied volatility of Calls closed at 14.91 per cent while that for put options closed at 15.61. The Nifty VIX for the week closed at 17.06 per cent PCR OI for the week closed at 1.11," remarked Bisht. In the F&O space, FIIs focused on the index futures segment and closed their long positions. FIIs were net sellers in index futures worth Rs 780 crore. They bought to the tune of Rs607 cr in stock futures and index options worth Rs 3,730 cr.

Bank Nifty

NSE's banking index closed the week at 39,573.70 points, a net recovery of 458.10 points or 1.17 per cent, from the previous week's closing of 39,115.60 points.

The Bank Nifty OI for the November series rose eight per cent with positive price action. Analysts predict that apart from Axis Bank other private players would support the index whereas PSU would continue to outperform.

As per data from ICICIdirect.com, the major Call OI base is distributed from 40,000 to 41,000 strikes. However, last week's high near 40,200 should act as a trigger point for closure of Call writing positions in the Bank Nifty. This should help the index move higher. In case of any profit booking from higher levels, multiple supports are placed for the index on the lower side. Major Put writing in the index is near its ATM strike of 39,500. Intermediate support is placed at the current price itself.

The current price ratio of Bank Nifty-Nifty remained near 2.20 as recommended earlier. However, support for the same is near 2.18 levels. The price ratio would move towards 2.26 levels on the back of the Bank Nifty, according to ICICIdirect.com.

F&O Turnover
Product Contracts Turnover (Rs/cr) Premium (Rs/cr)
Index Futures 57,147 5,372.65 --
Stock Futures 1,28,267 10,200.16 --
Index Options 75,03,655 7,16,985.58 3,246.76
Stock Options 3,27,994 27,586.10 586.58
F&O Total 80,17,063 7,60,144.49 3,833.35

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