Modest consolidation amid volatility

Based on the latest options data, the Call base for the weekly as well monthly expiry is highest at 16,000 Call strike, 1,000 points higher than previous week and it should be a critical resistance. Since mid-March, the Nifty remained largely in the range of 14,300-14,900, while breach of the range should trigger a fresh directional bias. However, on an immediate basis, analysts forecast the highest Put base of 14,000 may act as support. Further, the volatility in the market remained higher near 23 level and closed the week near 23 owing to the short covering.

After high volatility in the April series, Nifty is expected to move towards some consolidation before fresh directional move. On the rollover front, the NSE Nifty commenced the new series, May derivatives, with almost nine million shares, marginally higher than the April futures and options (F&O) series. Nifty Series on Series rose by four per cent and Bank Nifty underperformed marginally as the banking index rose by two per cent. Nifty recorded a rollover of 66.28 per cent to May series as against 81.67 per cent in April series and three-month average of 79.06 per cent.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "In current week expiry, the Call writers were more aggressive than Put writers and highest Call concentration is at the 15,000 strike. The highest Put concentration is placed at 14,000 strike"

The 16,000 strike has the highest Call OI followed by 15,500/ 15,000 /15,600 strikes. 16,000/ 15,500/ 15,600/ strikes recorded significant build-up of Call OI. Coming to the Put side, the 14,000 strike continued to have the highest Put OI for a second week followed by 14,500 / 14,700/ 14,200 strikes witnessed reasonable addition of Put OI."Nifty again touched the 15,000 mark in April series and showed some profit booking from there as uncertainty regarding the second wave of pandemic still persists. The April derivatives series closed at a slightly positive note where the advance-decline ratio of futures and options stocks was 2.06 for the full expiry. Metal and pharma showed good strength against the market in the April F&O series, and are expected to continue the same in May series," added Bisht.

The domestic stock market witnessed a strong recovery in the settlement week for the April derivatives series and moved towards 15,000 points, but closed the week just above the 14,600 strike. The NSE Nifty gained almost two per cent in the week, the banking index moved up almost three per cent. On the other hand, mid-caps and small-cap stocks found momentum and closed the month near recent highs.

For the week ended April 23, 2021, BSE Sensex closed at 48,782.36 points, a net recovery of 903.91 points or 1.88 per cent, as against 47,878.45 points. NSE Nifty too recouped by 289.75 points or 2.02 per cent and closed at 14,631.10 points from 14,341.35 points.

Bisht forecasts: "From technical front, Nifty can be seen trading upwards once it breaches a psychological level and highest Call concentration at the 15,000 level as if the market is trading in a broad range of 15000-14500 levels. Beyond these levels, we can see a sharp movement and rise in volatility."

The high volatility suggests a sign of caution for investors. According to ICICI Direct.com, a fresh uptrend should be expected only if the volatility index starts subsiding. Broader markets witnessed a strong recovery in the settlement week and moved towards 15,000 before closing the week just above the 14,600 strike. Continued buoyancy in metals and short covering move in the banking space led the recent market recovery, while the rest of the sectors remained largely subdued. "The Implied Volatility of Calls closed at 22.19 per cent, while that for Put options closed at 24.19 per cent. The Nifty VIX for the week closed at 23.31 per cent and is expected to remain volatile. PCR of OI for the week closed at 1.68," remarked Bisht. In the F&O space, FIIs were primarily seen in the stock futures and index options segment as foreign investors bought Rs472-crore index futures, Rs5,309-crore stock futures and Rs4,104- crore index options.

Bank Nifty

The NSE's banking index Bank Nifty closed at 32,781.80 points, a net gain of 1,059.50 points or 3.33 per cent from 31,722.30 points.

Continued buoyancy in metals and short covering move in the banking space led the recent market recovery while the rest of the sectors remained largely subdued. Bank Nifty OI has declined significantly compared to the April series, while the roll spread has declined across the board.