Options data holds wild swings

The significant build-up of Open Interest (OI) at a wide range of Nifty strikes on both Call and Put sides indicates broad-spread trading for the week ahead (January 24-28, 2022). Hence, volatile trading may take place after a heavy weekly loss, observe derivatives analysts. The support and resistance levels declined 1,000 points each to 18,000CE and 17,000PE respectively. Higher volatility due to third quarter earnings is further creating panic among investors.

The 18,000 strike has the highest Call OI followed by 19,000/18,500/17,900/ 17,800/18,100/ 18,300 strikes. Further, 17,700/ 17,800/18,200/17,900 strikes witnessed heavy build-up of Call OI. Coming to Put side, maximum Put OI is seen at 17,000 strike followed by 16,500/ 17,200/ 17,500/17,600/16,500 strikes. Strikes including 17,000/ 17,600/17,400/16,500 recorded reasonable addition of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers were seen adding hefty Open Interest at 17800 & 17900 strike, while Put writers added marginal Open Interest at 17600 strike. For the upcoming week, we expect markets to trade on a volatile path and could witness big intraday moves as we are moving towards January series expiry."

The volatility may continue higher in the week ahead on account of January derivatives settlement and upcoming Union Budget 2022. The Put base at 17500 may act as an immediate support and move towards its VWAP of 17950 this week. On the higher side, the Call writing at 18000 strike may remain a crucial hurdle in the coming sessions, according to ICICIdirect.com.

The Nifty OI fell last week owing to liquidation from FIIs, which reduced net longs to lowest levels in more than two months. Due to low leverage, fresh accumulation in the index is important for renewed movement.

"After gaining for four consecutive weeks, finally some selling pressure was witnessed in Indian markets as NSE Nifty index slipped sharply towards 17,600 mark during the week as traders were seen booking profit at higher levels before the upcoming Union Budget. The weak sentiments from the global front also added further pressure in Indian markets as sell-off in global equity markets was sparked by jitters around the US Federal Reserve's tightening pace and weak economic data," remarked Bisht.

For the week ended January 21, 2022, BSE Sensex closed at 59,037.18 points, a net loss of 2,185.85 points or 3.57 per cent, from the previous week's closing of 61,223.03 points. Registering a fall of 63.60 points or 3.49 per cent, NSE Nifty ended the week at 17,617.15 points from 18,255.75 points a week ago.

Bisht forecasts: "From technical front, Nifty is likely to face a strong hurdle at its 20-day Exponential Moving Average on daily charts which is placed at 17800 level. The strong support for the index is now placed at 17500-17450 zone. The trading bias is likely to remain in favour of bears as far Nifty holds below 17950 levels broadly."

India VIX rose 6.17 per cent to 18.89 level. Despite the sharp fall in the market, India VIX remained below 19 level. Analysts predict that downside movement may be limited from current level for the index. Sustainability above current level is crucial for further weakness in the market.

FII activity in the F&O space rose substantially as they turned net sellers in Nifty as well as

stock futures. With the Nifty moving below 18,000 points, FIIs bought index options worth Rs20,657 crore and sold to the tune of Rs5,023 crore in index futures and Rs3,963 crore in stock futures. "Implied Volatility of Calls closed at 17.30 per cent, while that for Put options closed at 18.32. The Nifty VIX for the week closed at 17.79 per cent. PCR of OI for the week closed at 0.74," adds Bisht.

Bank Nifty

NSE's banking index closed the week at 37,574.30 points, a decline of 796.10 points or 2.07 per cent, from the previous week's closing of 38,370.40 points.

Pivotal levels for the Bank Nifty were near 38000 level, where it consolidated. However, as the index violated its key support level, aggressive Call writing took place at 38,000 strike. Call for the main expiry. Hence, a close above this level should support upsides in the index. On the support front, sizable Put OI is placed at 37,000 strike. However, if other private banks fail to give a positive surprise post their numbers, then the index may violate 37000 levels, observes ICICIdirect.com.