Options data holds undercurrent bearish bias

The highest Call and Put bases moved to lower strikes as the resistance level declined by 700 points to 22,800CE and the support level rose by 500 points to 22,000PE. The latest options data on NSE after last Friday’s session is pointing to that the market is losing steam.

The 22,800CE has highest Call OI followed by 23,500/ 23,000/ 22,700/23,100/ 23,450/ 24,000/ 23,400/ 22,650/ 22,900/ 23,350/ 22,650 strikes, while 22,800/ 22,900/ 23,000/ 23,500/ 22,700/ 23,100 strikes recorded hefty build-up of Call OI.

Coming to the Put side, maximum Put OI is seen at 22,000PE followed by 21,800/ 21,900/ 22,200/ 22,500/ 20,250/ 22,100/ 22,300/ 22,400/ 21,700 strikes. Further, 22,000/ 21,900/ 22,200/ 22,450/ 21,800/ 22,100 strikes recorded reasonable addition of Put OI.

Modest OI fall was to select deep OTM strikes in the 21,300-20,900 range. Similar OI decline was also recorded in deep ITM strikes in the 22,600-22,800 range. Nifty is expected to continue in consolidation mode amid ongoing results season where the 22,300 level may act as immediate support for the index.

Dhirender Singh Bisht, associate vice-president (technical research) at SMC Global Securities Ltd, said: “From the derivatives front, Nifty options showed the highest call open interest at the 22,800 and 23,000 strikes, while the highest Put Open Interest was noted at the 22,000 and 22,500 strikes. For Bank Nifty, the highest Call Open Interest was at the 49,500 strike, while the highest Put Open Interest was observed at the 48,500 strikes.”

Aggressive Call writing was observed owing to heavy profit booking on Friday. Put strikes with 22,500 and 22,600 Call strikes holding the highest OI base among all strikes. Hence, a fresh upward move for Nifty can be expected if Nifty moves above 22,600 level once again.

“In the previous week, Nifty saw a flat closing and also formed a bearish engulfing pattern on the daily chart. In contrast, Bank Nifty outperformed Nifty, wrapping up the week with a 1.5 per cent gain. Profit-taking was seen in IT and media stocks, while PSU and financial services stocks emerged as major gainers,” added Bisht.

BSE Sensex closed the week ended May 3, 2024, at 73,878.15 points, a net gain of 147.99 points or 0.20 per cent, from the previous week’s (April 26) closing of 73,730.16 points. For the week, NSE Nifty also moved up by 55.90 points or 0.24 per cent to 22,475.85 points from 22,419.95 points a week ago.

Bisht forecasts: “Currently, both indices have developed a negative divergence pattern, with the rising India VIX suggesting a limited upside potential. In the upcoming session, Nifty is anticipated to trade within the range of 22,700-22,200.”

India VIX, volatility index, moved to one of its lowest levels last Tuesday by declining more than 20 per cent and since then it moved up marginally. It rose 8.72 per cent to 14.62 level. Further rise in volatility can’t be ruled out from current levels.

“Implied Volatility for Nifty’s Call options settled at 11.76 per cent and Put options concluded at 12.57 per cent. The India VIX, a crucial market volatility indicator, ended the week at 13.45 per cent. The Put-Call Ratio of Open Interest stood at 1.39 for the week,” remarked Bisht.

Nifty rollover into May F&O series with 11 million shares and it was in line with the April series. During the settlement, it recorded significant short covering, while fresh short additions were evident in the First session of the new series from FIIs. Retail participants went significantly long in the index futures segment with nearly 1.5 lakh net long contracts. Thus, a risk of long liquidation can’t be ruled out if Nifty moves below 22300 levels, according to ICICIdirect.com.

Bank Nifty

NSE’s banking index closed the week at 48,923.55 points, higher by 722.50 points or 1.49 per cent from the previous week’s closing of 48,201.05 points.