Hefty OI build-up points to gaining steam in markets

The 24,000CE has highest Call OI followed by 23,500/ 24,500/ 23,000/23,100/ 23,200/ 23,300/ 23,400/ 23,600/ 23,700, while 23,000/23,500/ 23,100/ 24,000/ 24,500 strikes recorded robust build-up of Call OI. Deep ITM strikes from 22,900 onwards suffered marginal Call OI fall.

Coming to the Put side, maximum Put OI is seen at 23,000PE followed by 22,500/21,500/ 22,000/ 20,050/ 20,500/ 21,800/ 22,200/ 22,300/ 22,400 strikes.

Further, 23,000/22,900/ 20,050/ 21,900 strikes witnessed reasonable addition of Put OI. Modest fall in Put OI is visible at deep OTM strikes.

Dhirender Singh Bisht, associate vice-president (technical research) at SMC Global Securities Ltd, said: “In the derivatives market, Nifty options showed the highest Call Open Interest at the 23,500 and 23,000 strikes, while the highest Put Open Interest was observed at the 23,000 and 22,500 strikes. In the upcoming session, the 23,000 level will play a crucial role as both Call and Put writers are active at this level and also it is a significant psychological level.”

Due to sharp recovery in weekly expiry on last Thursday, aggressive Put writing took place from 22,200 strike to 22,400 strike. Call option base is at deep OTM 23,000. It’s expected that Nifty may hold above these levels. Nifty moved to 23,000 points on the back of further short covering ahead of election results. On downside, the support level is at 22,200 for Nifty.

“Last week, NSE Nifty index touched a record high and closed with a weekly gain of over two per cent, while Bank Nifty rose by more than 1.5 per cent. Major gainers were media, metal and PSE stocks, whereas small-cap and healthcare stocks demonstrated profit booking,” added Bisht.

BSE Sensex closed the week ended May 24, 2024, at 75,410.39 points, a net gain of 1,404.45 points or 1.89 per cent, from the previous week’s (May 18) closing of 74,005.94 points. For the week, NSE Nifty also moved up by 455.10 points or 2.02 per cent to 22,957.10 points from 22,502 points a week ago.

Bisht forecasts: “It is expected that bullish momentum is likely to carry in upcoming sessions as well and traders should use dips to create fresh longs as far Nifty holds above 22,700 level.”

In futures space, indices continue to witness short build-up last week. FIIs added one lakh contracts in index futures last week. However, most of these shorts are formed in June series and seems like part of hedging ahead of union elections results. Thus, short covering should provide cushion in case of any decline towards 22,200 level. India VIX rose 1.54 per cent to 21.71 level on last Friday.

“Implied Volatility for Nifty’s Call options settled at 19.09 per cent, while Put options concluded at 20.03 per cent. The India VIX, a key market volatility indicator, closed the week at 21.38 per cent. The Put-Call Ratio of Open Interest stood at 1.30 for the week,” remarked Bisht.

Bank Nifty

NSE’s banking index closed the week at 48,971.65 points, higher by 778.40 points or 3.43 per cent from the previous week’s closing of 48,199.50 points. “For the Bank Nifty, the highest Call Open Interest was observed at the 50,000 and 49,000 strikes, while on the Put side, the highest Open Interest was at the 48,000 and 48,500 strikes,” observed Bisht.