Restricted trading likely as support level moving up
The support level moved up by 400 points to 17,400PE, while the resistance level remained unchanged at 18,000CE for the second consecutive week, according to the latest options data on NSE. The trading range has been narrowed down when compared to the previous week's broad-based trading pattern.
The 18,000 strike has the highest Call OI followed by 17,500 /18,500/18,200/17,600/ 17,800 strikes. Further, 18,000/18,300/18,100/ 17,600/ 17,500 strikes witnessed significant addition of Call OI.
Coming to Put side, maximum Put OI is seen at 17,400 strike followed by 17,200/17,000/ 16,500/16,400/ 17,300/ 17,500 strikes. Moderate build-up of Put OI is at 17,400/17,200/ 17,000/ 16,900/ 16,500/16,300 strikes.
Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, short covering was observed at 17200 & 17300 strikes, while Put writers added hefty Open Interest at 17,400 strike."
According to ICICIdirectcom, Put option concentration is strengthening at 17200 strike, while the highest Call base remains at 17500 for the coming week as well, after recent volatility, Nifty may consolidate with immediate support near 17200 and only a move below 17200 may attract fresh weakness in the indices. Sustainability above 17500 levels should open gates for 17800 on upsides.
"Indian markets recovered smartly from their recent lows and the Nifty ended the week above 17,500 mark, taking cues from firm global markets and strong domestic factors," added Bisht.
For the week ended December 10, 2021, BSE Sensex closed at 58,786.67 points, a net gain of 1,090.21 points or 1.88 per cent, from the previous week's closing of 57,696.46 points. Registering a rise of 314.60 points or 1.82 per cent, NSE Nifty ended the week at 17,511.30 points from 17,196.70 points a week ago.
Bisht forecasts: "On the technical front, once again Nifty has managed to close above its 100-day exponential moving average, but still feeling shy to break above its 50days exponential moving average on daily charts. For upcoming week, we believe that once Nifty surpasses 17,600 level decisively, then we could witness the next round of short covering which could leap Nifty towards 17750 levels as well. On the downside, 17400 & 17250 would act as a strong support for the index."
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India VIX declined by 3.27 per cent to 16.06 level. Volatility index fell sharply below 17 level along with market recovery. It's expected to remain sideways and cool-off further in coming sessions. US VIX has also declined significantly from 30 to near 20 levels suggesting near term consolidation. From the sectoral perspective, banking and Auto space may continue to witness the short covering trend seen last week, while technology space may consolidate further.
"Implied volatility of Calls closed at 14.26 per cent, while that for Put options closed at 14.96. The Nifty VIX for the week closed at 16.60 per cent. PCR of OI for the week closed at 1.45," remarked Bisht.
The leverage positions in index futures declined marginally as short covering was experienced across the sectors. However, some change of bias is visible from FIIs which have turned net longs both in Index as well as stock futures. Domestic institutions remained significantly short in index and stock futures while retail participants are significantly net long in stock futures.
In the F&O space, FII activity declined significantly across the segments as short covering took place with the market recovery.
FIIs bought index options worth Rs5,628 crore and Rs1,568 crore in stock futures suggesting some short covering, while selling index futures worth Rs1m374 crore.
NSE's banking index closed the week at 37,105.65 points, a marginal recovery of 908.50 points or 2.50 per cent, from the previous week's closing of 36,197.15 points.
The Put- Call OI ratio for Bank Nifty remained muted for a while, but in the December series it moved near 1 level as the overall Put writing quantum rose as index reverted from its recent low of 35800 levels. During the process, traders became more aggressive and wrote Put options with a view of limited downsides from current levels.