Call writers shifting to higher bands

The resistance level remained at 19,000CE for a fourth consecutive week and the support level remained unchanged at 18,300PE for two weeks in a row. Call and Put writers aggressively building up positions and this is indicating range-bound trading with positive bias.

The 19,000CE has highest Call base followed by 18,600/18,600/ 18,300/ 18,400/ 19,500/ 18,900/ 18,700 strikes, while 19,000/ 18,800/ 18,600/ 18,500/ 19,500 strikes recorded reasonable build-up of Call OI. Coming to the Put side, the 18,300 has maximum Put OI followed by 18,400/18,500/ 18,200/17,500/ 17,700/ 18,200 strikes. Further, 18,500/18,200/ 18,100/17,850/ 18,400 strikes have reasonable additions of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, the Put writers are seen adding hefty Open Interest at 18,300 strike, while Call writers seen shifting at higher bands. Implied Volatility (IV) of Calls closed at 11.64 per cent, while that for Put options closed at 12.39 per cent. The Nifty VIX for the week closed at 13.48 per cent. PCR of OI for the week closed at 1.38 lower than the previous week."

As per data on ICICIdirect.com, both the Call and Put strikes recorded a heavy OI build-up and it's suggesting expectations of a range-bound market. While the highest Call base is placed at ATM 18500 strike, Put base is visible at 18,300 strike. Moreover, the Nifty Futures Open Interest at the inception of December remained almost flat vis a vis last series. The FII net longs were at one of the highest seen in the last few years. Hence, it signals a positive movement until Nifty is holding its Put base.

"Indian markets surged sharply higher in the week gone by as bulls slammed the bears on Dalal Street as Bank Nifty and Sensex both the indices marked all-time highs. Nifty scaled towards 18500 level, while Bank Nifty closed the week with gains of more than 1.25 per cent," added Bisht. BSE Sensex closed the week ended November 25, 2022, at 62,293.64 points, a marginal recovery of 630.16 points or 1.02 per cent, from the previous week's closing of 61,663.48 points. NSE Nifty ended the week at 18,512.75 points, edged up by 205.10 points or 1.12 per cent, from 18,307.65 points a week ago

Bisht forecasts: "Technically Nifty has given a fresh breakout above 18,450 mark and can be seen trading in a rising channel. Additionally Nifty Futures is also currently trading with a premium of more than 100 points on local bourse, which clearly points towards strength in current trend. For the upcoming week, we keep our stance Bullish for Nifty and advise traders to use any dip to create fresh longs. On the downside, 18350-18300 zone would act as strong support for the Nifty."

Volatility index India VIX eased 1.08 per cent to 13.33 level. India VIX declined sharply last week and closed the week at its lowest levels in more than a year suggesting prevailing comfort in the market despite trading near life highs. Only concern remains the high Nifty premium and historically, Nifty was not able to perform at such a high premium. Hence, we believe any declines will be short lived and dips can be used for creating fresh longs.

The November series saw the Nifty rise, the series at 18484 levels. Series-on-series, the Nifty closed with a gain of 4.2 per cent and the Bank Nifty also ended 4.30 per cent higher at 43075. On the Open Interest front, the Nifty added 45 per cent and is starting the December series with 112 lakh shares in open interest.

On the Rollover front, the Nifty saw a higher rollover of 81.91 per cent from previous 76.05 per cent and versus the three-month average of 78.68 per cent with a rollover cost of 142.05 points. It indicates some of the longs in the Nifty have got carried forward.

Bank Nifty

NSE's banking index closed the week at 42,983.95 points, a further recovery of 546.50 points or 1.28 per cent, from the previous week's closing of 42,437.45 points. "The 42500-42400 zone is likely to provide support to the banking index," said Bisht.

Bank Nifty began the December Derivatives series with almost three million shares, doubled from the OI seen in the last November series. Such a sharp rise in the banking index is likely to trigger some volatility towards the end of the month. Among heavyweights, Axis Bank and HDFC Bank should continue to lead the rally from here. Options are placed in both ATM Calls and Puts, which suggest a broader consolidation. However, Bank Nifty is heading higher and 44000 levels on upsides can't be ruled out. On downsides, declines are possible towards 42500 remain buying opportunities in the near term.