F&O data holds range-bound trading ahead
After three weeks, the resistance level eased by 200 points to 15,800 strike, while the support level remained at 15,000 points for a third consecutive week. The 15,800 strike has maximum Call base of OI followed by 16,000/ 15,900/15,300/16,500 strikes, while 16,300/ 16,5000/15,900 strikes recorded reasonable addition of Call OI. The 15,000 strike witnessed highest Put OI followed by 15,100/ 15,500 /15,600/15,700 strikes. Further 15,600/ 15,000/15,500/ 15,450 strikes recorded moderate Put OI build-up.
Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Indian markets snapped its four-session losing streak on Friday and as Nifty managed to end above 15,700 mark, driven by gains in blue chips like Reliance Industries and ICICI Bank. However, on weekly basis both the indices Nifty and Bank Nifty settled in red zone. Some lacklustre moves were seen during the week as tug of war between bulls and bears kept traders on indecisive mode."
After the continued range-bound trading in June, the first week of the July F&O series also remained lacklustre. Positive US equities couldn't cheer the domestic markets. Emerging markets remained under pressure as Dollar index moved sharply higher. For the week, Nifty shed almost 0.8 per cent, whereas broader markets continue to outperform and closed in green. Sectorally, apart from FMCG and Pharma, rest of the sectoral indices closed in negative.
"From derivatives front, Call writers at 15,800 strike hold maximum Open Interest, which should act as immediate strong hurdle for Nifty. For upcoming week, we expect markets to trade in sideways manner. However, if Nifty manages to break 15,800 level decisively then we might witness 16,000 level in short span. Till then traders should remain focus on stock-specific action," said Bisht.
India VIX fell 5.84 per cent from 12.84 to 12.09 levels, lowest in 17 months. On the sectoral front, due to continued range bound movement and declining IVs, option writers have maximum positions at ATM strikes. For the coming week as well, 15700 Put and 15800 Call holds the highest option base where 15800 Call hold more than 40 lakh shares. We believe result season may provide some trigger to move out of the prevailing range of 15600-1590
"The Implied Volatility of Calls closed at 11.96 per cent, while that for Put options closed at 20.42 per cent. The Nifty VIX for the week closed at 12.84 per cent. PCR of OI for the week closed at 1.27," remarked Bisht.
"From technical front Bank Nifty is trying to take support at its 50 days exponential moving average which is placed around 34500 levels," added Bisht.
The Bank Nifty largely remained in a range. Since the past few weekly expiries, it has been closing near 35000 levels, which happened last week as well. Private banks remained under pressure whereas positive actions were there in most PSU banks, which are attracting buying on dips.
Premiums in Nifty futures have declined in the past few days whereas they remained intact in the Bank Nifty along with a rise in OI for the July series. While FIIs have reduced their net longs in index futures, any change of trend is expected only below 34,500 points, which remains a strong support.
IVs have contracted further and moved towards 12%. Due to this, option writers have become aggressive and are selling ATM and OTM options. For the current week as well, we feel short Straddle or Strangle traders should make money as the index is likely to trade in a range.
According to ICICI Direct.com, major Call OI addition for the week was seen in 35500 strike, above which a directional move is expected. Analysts feel the Bank Nifty would trade in a range while there would be stock specific action in coming days.
Activities in Nifty futures remained muted last week as well. However, FIIs have created fresh shorts in the index while their net longs, which declined from 90,000 contracts to just 56,000 contracts since June settlement. Hence, it feels like some short bias from FIIs is building-up.