OI bases at Put ITM & OTM strikes declining

Liquidation Risk

• India VIX fell 3.55% to 13.86 level
• Nifty OI remained higher near 1.5 crore shares
• Its monthly OI at 1.1 crore shares
• It may cause liquidation risk
• Bank Nifty futures recorded aggressive short additions

The latest options data on NSE after the last Thursday session is pointing to easing support and resistance levels. The support level fell 250 points to 21,250PE and the resistance level eased by 150 points to 21,300CE.

The 21,300CE has highest Call OI followed by 21,350/ 21,400/ 21,500/ 21,800/ 21,900/ 21,500/ 21,250/ 22,200 strikes, while 21,300/ 21,350/ 21,400 recorded significant Call build-up. However, OTM strikes from 21,500CE onwards witnessed OI offloading.

Coming to the Put side, maximum Put OI is seen at 21,250 followed by 21,300/ 21,200/ 21,000/ 20,900/20,800/ 21,000/ 20,800/ 20,700 strikes. Further, only three strikes 21,250/ 21,300 and 21,350 recorded reasonable to heavy Put OI addition, while ITM and OTM strikes recorded fall in OI.

Dhirender Singh Bisht, associate vice-president (technical research) at SMC Global Securities Ltd, said: “Nifty’s derivatives data suggests, highest Call writing at the 21,500 strike. Conversely, Put writers displayed activity, particularly at the 21,000 strike. In Bank Nifty, the highest Call Open Interest was observed at the 45,000 strike and same for the Put.”

As per data on ICICIdirect.com, FPIs 82,000 net longs turned into shorts of 22,000 as the market was under severe selling pressure. Nifty OI remained higher near 1.5 crore shares with near month OI at 1.1 crore shares. It may cause liquidation risk.

Despite huge volatility last week, the 21350 Call strike holds significant OI after the end of Jan F&O series. The 21,500 level may act as immediate support, but weakness may extend if Nifty breaches these levels.

“During last week, the market experienced a notable correction, with some sectors facing significant downturns on the back of profit booking. Following the termination of the Zee deal with Sony, Zee saw a sharp decline of over 30 per cent in a single day, while, disappointing results from HDFC Bank further faded the sentiments of the market and selling pressure seen in banking counters. On the other hand, pharma and health care sectors demonstrated relative strength in comparison to the overall market, while profit booking seen in media, realty and private banks stocks,” added Bisht.

BSE Sensex closed the week ended January 25, 2024, at 70,700.67 points, a net fall of 722.98 points or 1.01 per cent, from the previous week’s (January 20) closing of 71,423.65 points. During the week, NSE Nifty too declined by 219.20 points or 1.01 per cent lower at 21,352.60 points from 21,571.80 points a week ago.

Bisht forecasts: “In upcoming session, technically 44500 level will act as a make or break level for Bank Nifty. Traders are advised to focus on sector-specific moves and use dips to create fresh longs. However, intraday volatility is likely to keep a grip over Indian markets in coming week as well.”

India VIX fell 3.55 per cent to 13.86 level. Considering ongoing result season and shortened expiry week, it may remain higher and only a move below 13 may indicates some stability in the coming sessions.

“In the week gone by Implied Volatility for Nifty’s Call options settled at 12.78 per cent, while Put options concluded at 13.36 per cent. The India VIX, a key indicator of market volatility, concluded the week at 13.86 per cent. The Put-Call Ratio of Open Interest stood at 1.26 for the week,” remarked Bisht.

FIIs were active in index futures and options. Foreign funds shorted index futures worth Rs7,800 crore and they sold index options of nearly 1.25 lakh crores. FIIs sold nearly Rs3,500-cr worth stock futures as they reduced their long exposure.

“Highest rollover was seen in February F&O series in realty, cement and consumer durable sector, whereas lowest rollover seen in tyres, telecom and power sector. We can expect some sector-specific movement based on the proposal made in union budget in this expiry,” said Bisht.

Bank Nifty

NSE’s banking index closed the week at 44,866.15 points, further lower by 1,192.05 points or 2.58 per cent from the previous week’s closing of 46,058.20 points. Bank Nifty futures recorded aggressive short additions along with stock futures. Bank Nifty may remain under pressure this week. Some cushion is expected from the PSU stocks, but moving beyond 47,200 levels seems unlikely in the ongoing settlement.