Highest Call, Put bases at 18,200 strike suggest consolidation
India VIX fell 3.85% to 12.30 level; Marginal liquidation in Nifty futures; Roll premium in Nifty is relatively high near 115pts and Roll spread may ease to 80pts in the current settlement week
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As the market is getting into settlement week, May F&O series is slated for expiry this Thursday (on May 25), the Call writing is comparatively higher. Highest Open Interest (OI) base is placed at 18,200 strike on either side of the options chain. Considering both VWAP and Call options base, Derivatives analysts predict that fresh longs are possible if Nifty moves above 18,250 during settlement week. This assumption is based on Volume-Weighted Average Price (VWAP) and Call options base.
As per the latest options data on NSE, the resistance level eased by 100 points to 18,200CE and the support level remained at 18,200 for the third consecutive week.
The 18,200CE has highest Call OI followed by 18,400/ 18,500/ 18,300/ 18,800/ 19,100/ 19,000/ 18,450 strikes, while 18,450/ 18,400/ 18,600/ 18,800/ 18,850 strikes recorded reasonable addition of Call OI.
Coming to the Put side, maximum Put OI is seen at 18,200 followed by 17,500 / 18,100/ 18,000/ 17,800/ 17,700 strikes. Further, 18,000/ 18,100/ 18,150/ 17,800/ 17,500 strikes witnessed modest build-up of Put OI.
Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “From the derivatives front, option writers remain active in both Calls and Puts at 18,200 strike, while marginal Put writing was observed at 18,000 & 18,100 strikes.”
According to ICICIdirect.com, marginal liquidation was recorded in Nifty futures last week. Considering dividend of 45 points in June series, the roll premium in Nifty is relatively high near 115 points. Roll spread is expected to ease to 80 points in the settlement week. The domestic markets have struggled to perform with high premiums in the past, analysts expect more of consolidation with positive bias in the expiry week.
“Indian markets remained volatile in the week gone by and ended the week almost near an unchanged line as Nifty closed above 18,200 level, while Bank Nifty once again outperformed and gained nearly half-a-per cent over the week. On weekly charts, the IT sector performs well whereas profit booking is seen in pharma stocks,” added Bisht.
BSE Sensex closed the week ended May 19, 2023, at 61,729.68 points, a marginal decline of 298.22 points or 0.48 per cent, from the previous week’s (May 12) closing of 62,027.90 points. NSE Nifty ended the week at 18,203.40 points, lower by 11.40 points or 0.60 per cent from 18,314.80 points a week ago. Bisht forecasts: “Technically, both indices look strong on the charts. However, we expect that some consolidation is likely to continue in Indian markets at current levels before the Bank Nifty takes a leap above its lifetime highs. Nifty on other hand is likely to catch up a fresh momentum towards 18,500 level once a decisive move is seen above 18,300 in the coming week.”
On the other hand, concerns about the debt ceiling in the US have been impacting the global markets. As a result, US VIX fell to one-year low, while equity indices are trading at multi month highs. In India also, there's a cool-off in the volatility index and expecting positive bias to continue. India VIX fell 3.85 per cent to 12.30 level. Bisht further stated that “the Implied Volatility (IV) of Calls closed at 11.03 per cent, while that for Put options closed at 11.97 per cent. The Nifty VIX for the week closed at 12.80 per cent. The PCR of OI for the week closed at 0.74, which indicates more Call writing on the upside during the week.”
FIIs in F&O space held limited activity as major action remained in the cash segment. Marginal short covering was seen in the index futures last week. FIIs bought index futures worth Rs825 crore and closed longs in stocks futures segment worth Rs2,163 crore. Moreover, FII were largely sellers in index options expecting a range-bound movement.
Bank Nifty
NSE’s banking index closed the week at 43,969.40 points, a net gain of 175.85 points or 0.40 per cent from the previous week’s closing of 43,793.55 points. “Bank Nifty is also struggling to catch up with momentum above the 44,000 mark,” observed Bisht. Highest Call OI build-up is placed at 44,000 strike, while Put writing witnessing is visible at 43,500 strike. FIIs remained as buyers with a focus on BFSI space. Banking space is expected to lead the momentum.
