Major Fall In Implied Volatility Signals Easing Fluctuations

Implied Volatility (IV) fell from over 26 to 15.77 on 26,000CE and IV on highest Put base eased from 54.88 to 15.07 level. Significant IV fall indicates returning stability to the market and less risk of large price swings when compared to the last week. The latest options data on NSE after last Friday session is indicating a narrow trading range as the resistance level marginally declined by 200 points to 26,000PE, while the support level significantly rose by 4,350 points to 25,000PE.

The 26,000CE has highest Call OI followed by 26,800/ 25,500/ 26,500/ 25,000/ 24,800/ 25,800 strikes, while 26,800/ 26,500/ 25,900/ 25,100 strikes record heavy to reasonable build-up of Call OI. Modest Call OI fall is visible at select deep ITM strikes.

Coming to the Put side, maximum Put base is seen at 25,000PE followed by 24,500/ 24,700/ 24,800/23,800 strikes. Further, 25,000/24,700/ 24,000/ 23,700/ 22,100 strikes witnessed marginal addition of Put OI. Few deep OTM Put strikes recorded modest OI fall.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “In the derivatives market, prominent Call Open Interest for Nifty seen at the 25,500 and 25,000 strikes, while the notable Put Open Interest was at the 25,000 strike. In upcoming session 25,000 level will play an important role. For Bank Nifty, the prominent Call Open Interest was seen at the 55,500 and 56000 strikes, whereas notable Put Open Interest at the 55,000 strike.”

Due to major volatility during the last week, highest Put concentration was placed at near ATM 25,000 Put strike, which seems to be part of portfolio hedging. Call OI is distributed across the ATM and OTM strikes with immediate Call base placed 24,500 strike.

“The market rallied on the following news of a ceasefire between India and Pakistan. Additional factors such as expectations of a trade deal between India and the US, along with FII buying in equities during May, also supported the market. Nifty closed the week with a gain of over four per cent, while Bank Nifty rose by more than 3.25 per cent during the same period. Leading sectors included Indian defence, capital markets, and Indian railways, while underperformers were chemicals, pharma, and FMCG,” added Bisht.

For the week ended May 16, 2025, BSE Sensex closed at 82,330.59 points, gauge jumped 2,876.12 points or 3.61 per cent, from the previous week’s (May 9) closing of 79,454.47 points. NSE Nifty too surged 1,011.8 points or 4.21 per cent to 25,019.80 points from 24,346.70 points a week ago.

India VIX fell 2.03 per cent to 16.55 level. A move above 24,500 may extend the strength in the market towards 24,800. India VIX has risen sharply in last few days and moved near 22 per cent level against the average of 14 per cent level, which we saw since October 2024. The surging India VIX is signaling protection buying for the portfolio through index options against any eventuality. VIX will cool-off this week and market will look for decent recovery.

“Implied Volatility for Nifty’s Call options settled at 14.22 per cent, while Put options conclude at 15.47 per cent. The India VIX, a key market volatility indicator, closed the week at 16.89 per cent. The Put-Call Ratio of Open Interest (PCR OI) for the week was 1.34. In the upcoming session, Nifty is likely to trade within the range of 25,300 to 24,800. The undertone remains bullish and any dip can be considered as a buying opportunity,” remarked Bisht.

FIIs turned net longs in Index futures for the first time since October, while short covering continued last week. FIIs closed the week net short positions of 7K contracts.

Bank Nifty

Bank Nifty NSE’s banking index closed the week at 55,354.90 points, a hefty recovery of 1,759.65 or 3.28 per cent from the previous week’s closing of 53,595.25 points.