Undercurrent positive bias amid rising volatility

At A Glance

• Highest Call base at 22,000CE
• Highest Put base at 21,300PE
• India VIX rose 6.55% to 13.13 level
• Rising volatility alerts caution

The resistance level moved up by 1,000 points to 22,000CE, while the support level rose 1,300 points to 21,300PE level as per the latest options data on NSE. The 22,000CE has highest Call OI followed by 22,500/ 22,200/ 21,600/ 21,800/21,700 /21,600 strikes, while 22,200/ 22,000/ 21,700/ 21,550/ 21,600 strikes recorded reasonable build-up of Call OI.

Coming to the Put side, maximum Put side is seen at 21,300PE followed by 21,200/ 21,400/ 20,900/ 21,000/ 20,500/ 20,600 strikes witnessed significant addition of Put OI.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “The highest Call Open Interest for Nifty options is concentrated at 21,500 and 21,600 strike prices whereas the highest Put Open Interest is observed at the 21,300 and 21,200 strike prices, indicating strong support zones.”

Call writers were aggressive last Friday with 22,000 Call holding the highest OI base as very nominal OI offloading took places at 21,300CE and deep ITM strikes. Analysts observe that any move beyond 21,050 should be crucial for continued uptrend in the index. On the downside, Nifty has a Put base of 21,300 while no fall in OI bases. Hence, the market is taking a good support in the coming week.

“The market witnessed a strong bullish sentiment, with Nifty gaining over two per cent and Bank Nifty recording a gain of more than 1.5 per cent. Both indices reached all-time highs, reflecting strong investor confidence and positive market sentiment. The IT, metal and PSU bank sectors exhibited notable strength, contributing significantly to the overall market gains whereas the pharma sector emerged as a major laggard, experiencing a relative underperformance compared to other sectors,” added Bisht.

BSE Sensex closed the week ended December 15, 2023, at 71,483.75, a further rally of 1,658.15 points or 2.37 per cent, from the previous week’s (December 8) closing of 69,825.60 points. During the week, NSE Nifty surged 487.25 points or 2.32 per cent to 21,456.65 points from 20,969.40 points a week ago.

Bisht forecasts: “The current market outlook is optimistic, marked by strong gains in key indices. However, the cautious stance indicated by the elevated India VIX suggests the importance of prudent risk management. In the upcoming week, Nifty may test the 21,100 level on the downside, while on the upside, it may test the 21,700 level.” The volatility index rose sharply last week and tested almost 14 levels before settling the week near 13 as India VIX rose 6.55 per cent to 13.13 level. “Implied Volatility for Nifty’s Call options settled at 11.24 per cent, while Put options concluded at 12.57 per cent. The India VIX, a key indicator of market volatility, concluded the week at 12.32 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.47 for the week,” remarked Bisht. The sharp rise in volatility can be attributed to aggressive Call closure by writers. Derivatives analysts forecast that volatility may ease towards 11 levels.

Bank Nifty

NSE’s banking index closed the week at 48,143.55 points, higher by 881.55 points or 1.86 per cent from the previous week’s closing of 47,262 points. “Bank Nifty options show the highest Call Open Interest at the 49,000 and 48,200 strike prices, highlighting potential resistance levels whereas highest Put Open Interest concentrated at the 47,500 and 48,000 strike prices,” said Bisht.