Call writers adding hefty Open Interest

The options data from NSE holds the same resistance level at 18,000CE for the third consecutive week, while support level declined by 400 points to 17,000PE. The 18,000 strike has highest Call OI followed by 17,300/17,500/ 17,200/17,400/17,100/ 17,000 strikes. Further, significant addition of Call OI is seen at 18,000/ 17,200/17,100/ 17,000/ 17,500 strikes.

Coming to Put side, maximum Put OI is at 17,000 strike followed by 17,100/16,800/16,500/ 16,400/16,000 strikes. The 17,000/16,500/17,100/ 16,000 strikes recorded reasonable build-up of Put OI. 17,250/17,400/17,500 strikes witnessed moderate offloading of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers added hefty Open Interest at 17000,17100 & 17300 strikes, while Put writers remained on the back foot and seen covering their short positions at 17000 strike."

As per the data on ICICIdirect.com, NSE Nifty holds highest Put concentration at ATM 17,000 strike for the coming weekly settlement. In contrast, Call option bases are much higher with immediate concentration placed at 17,200 strike with almost 45 lakh shares. Recent lows should be held, while a move above 17200 may trigger a fresh round of short covering in the index.

"Once again Indian markets witnessed heavy sell off in the week gone by and Nifty breached psychological level of 17,000 mark, while Bank Nifty tumbled below 36,000 mark," added Bisht.

For the week ended December 17, 2021, BSE Sensex closed at 57,011.74 points, a net gain of 1,774.93 points or 3.01 per cent, from the previous week's closing of 58,786.67 points. Registering a rise of 526.10 points or 3 per cent, NSE Nifty ended the week at 16,985.20 points from 17,511.30 points a week ago.

Bisht forecasts: "From technical front, Nifty has once again closed below its 100-day exponential moving average on daily charts and given a breakdown below rectangle pattern. For upcoming week, we expect markets to remain under pressure and move towards 16800 levels. On higher side 17100 & 17250 levels would act as a strong hurdle for Nifty. We advise traders to remain on cautious note as selling pressure likely to mount once again in coming week as far Nifty holds below 17300 mark broadly."

The volatility index India VIX moved up by 2.78 per cent to 16.34 level. A move towards 16,700 may cause a sharp rise in volatility, which may also trigger fresh weakness. Hence, from the current levels, 17200 level remains important for short covering to happen.

"Implied Volatility of Calls closed at 15.13 per cent, while that for Put options closed at 16.31. The Nifty VIX for the week closed at 15.90 per cent. PCR of OI for the week closed at 1.42," said Bisht.

Analysts expect the ongoing FII sell-off may ease in the coming sessions with the market witnessing some recovery. The leverage positions in index futures remained low and declined marginally last week. Despite the fresh declines, retail participants remained significantly net long on the stock futures segment.

The NSE Nifty remained volatile and after spending most of the week above 17200, moved below 17000 once again on Friday. Unabated FII sell-off amid hawkish Fed policy had kept the markets under pressure. FIIs sold almost Rs25,250 crore in secondary markets in December so far.

"The relentless selling by FII's kept Indian markets under pressure during the week as inflation concerns among global economies kept traders on cautious note," remarked Bisht.

In the F&O space, FIIs focused on stock movement, while shorts were observed in the stock futures segment. FIIs bought Rs8,619 crore index options and sold to the tune of Rs7,421 crore in stock futures and index futures worth Rs3,513 crore

Bank Nifty

NSE's banking index closed the week at 35,618.65 points, a marginal recovery of 1,487 points or 4 per cent, from the previous week's closing of 37,105.65 points.

Despite sharp reversals, the volatility index remained choppy last week and ended below 17% mark. However, we feel follow up

Derivatives analysts expect that selling in banking may continue as the Bank Nifty is likely to violate its November series low of 35,300 points. The highest Put base for the coming week is at 35000 strike whereas aggressive Call writing happened in 36000 and 36500 strike

Calls. Even if the Bank Nifty reverts, somewhere between 36000 and 36500, fresh supply could be seen. Hence, the outlook is negative on the index as it would test its highest Put base of 35000. A close below this level should trigger more downsides, according to ICICIdirect.com.