Call writers turn aggressive

Indicating range-bound trading for the truncated week ahead (August 14-18), the resistance and support levels remained at previous levels for a second consecutive week. The 19,600CE has the highest Call base followed by 19,500/ 20,000/ 19,800/ 19,700/ 19,900/ 20,100 strikes, while 19,500/ 19,550/ 19,600/ 19,800/ 20,000 strikes recorded significant build-up of Call OI.

Coming to the Put side, maximum Put OI is seen at 19,400 followed by 19,500/ 19,000/ 19,000/ 19,300 strikes. Further, 19,400/ 19,300/ 19,200/ 19,100/ 18,500 strikes witnessed reasonable addition of Put OI.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “As per the derivatives data, the highest Open Interest for Nifty Call options was at the 19,600 level, closely trailed by the 19,500 level. Conversely, for Put options, the highest Open Interest concentration was observed at the 19,400 level, followed by the 19,500 strike.”

Call writers were a bit aggressive due to profit booking seen among heavyweights last week, with the highest Call base placed at 19600 and 19700 strikes, while the Put writing was visible at 19300 and 19400 strikes. However, last week’s low near 19,300 may act as immediate support for the market, according to ICICIdirect.com.

“Over the past week, Nifty index concluded with a minor loss of about half-a-percent, while the Bank Nifty experienced a more substantial decline of over one and a half percent. It’s worth noting that sectors like media, consumer durables and IT showed notable gains, but the financial services and banking shares faced noticeable declines,” added Bisht.

BSE Sensex closed the week ended August 11, 2023, at 65,322.65 points, a further loss of 398.60 points or 0.660 per cent, from the previous week’s (August 4) closing of 65,721.25 points. During the week, NSE Nifty declined by 88.70 points or 0.45 per cent to 19,428.30 points from 19,517 points a week ago. The 19,500 strike can be used as stop loss for long positions.

Bisht forecasts: “Traders are recommended to exercise caution and implement tight stop-loss strategies, given the prevailing low volatility. Furthermore, specific stocks are expected to demonstrate movement in upcoming week. Looking ahead, the projected Nifty trading range for the upcoming week is estimated to span from 19,300 to 19,600 levels. A decisive breakthrough on either side has the potential to offer further momentum in market indices.”

FII net longs fell to 25,000 contracts from one lakh net longs as they have been liquidating their longs since July 20. Further, the delivery-based selling pressure in the index in last few sessions also limited the upside journey. FIIs were net buyers for four months till July. It’s natural that some pause or consolidation in the markets can be expected, observe analysts.

India Volatility Index (VIX) moved up sharply last Thursday and almost tested 12 level. On Friday, India VIX rose 1.07 per cent to 11.52 level. While the fear gauge declined once again, a rise in volatility remains a crucial risk. Hence, extended weakness can’t be ruled out if Nifty moves below 19300 level, as per ICICIdirect.com.

“In terms of Implied Volatility (IV), Nifty Call options settled at 9.17 per cent, while Put options concluded at 10.29 per cent. Additionally, the Nifty VIX, a measure of market volatility, concluded the week at 11.40 per cent. The Put-Call Ratio of Open Interest stood at 1.15 for the week,” remarked Bisht.

Bank Nifty

NSE’s banking index closed the week at 44,199.10 points, a net fall of 680.40 points or 1.51 per cent from the previous week’s closing of 44,879.50 points. “Taking Open Interest into account, the anticipated trading range for the Bank Nifty is between 44,500 and 44,000,” observes Bisht. According to data from ICICIdirect.com, the OI base in Bank Nifty moved towards Call writing and ATM 45,000 Call strike holds the highest OI base. Throughout last week, Bank Nifty recorded OI build-up at ATM and OTM strikes. Hence, there could be a broader move in the index where on upsides, 45500 level remains important with some stability expected only above these levels. However, the 44,500 level remains strong support on the downside.