Huge OI offloading indicates caution on D St

The truncated week (October 11-14) witnessed all-time high levels for the key indices, but the last Thursday expiry session recorded moderate to huge levels offloading at Call and Put strikes barring 2-3 strikes on both the sides. The OI offloading indicates funds withdrawal from the market, observe derivatives analysts.

The 18,350 strike has the highest Call OI followed by 18,500/ 18,300/ 19,00/ 18,700 strikes. Interestingly, only 18,350 strike recorded significant addition of Call OI, while 18,300/ 18,100/ 18,500 and 18,000 strikes witnessed offloading of Call OI including a major drop at 18,200 strike.

Coming to the Put side, the 18,300 strike has maximum Put OI followed by 18,200/ 17,800/17,900/ 18,000/ 18,350 strikes. Strikes 18,200/ 18,250/ 18,300/ 18,350 only witnessed build-up of Put OI, while other strikes recorded offloading of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Put writers were seen shifting to higher bands, while Call writers were observed covering their short positions at 18,200 & 18,300 strikes."

Analysts believe 17,800 should remain a major support for the index and an intermediate change of trend should be expected. With the NSE Nifty trading in unchartered territories, no major Call base is visible and options writers are making positions at OTM 18,500 strike for the coming settlement, which should be an immediate target for the index, according to ICICI Direct.com.

Consolidation is expected in technology stocks, metal stocks can be looked at for the short-term momentum. At the same time, pharma and cement stocks may witness a round of short covering.

"Indian markets scaled to its record highs in the week gone by as Nifty surpassed above 18,300 level on back of strong global markets along with favourable inflation data and good numbers released by Infosys and Wipro," added Bisht.

For the week ended October 14, 2021, BSE Sensex closed at 61,305.95 points, a net gain of 1,246.89 points or 2.07 per cent, from the previous week's closing of 60,059.06 points. Registering a further rise of 443.35 points or 2.47 per cent, NSE Nifty ended the week at 18,338.55 points from 17,895.20 points a week ago.

Bisht forecasts: "Technically both of the indices (Nifty and Bank Nifty) can be seen trading in a rising channel with formation of higher bottom pattern. For upcoming week, the 18,000 level is likely to act as a strong support for Nifty, while 38500-39000 zone would act as a strong demand zone for banking index. We expect that the bias is likely to remain in favour of bulls as far Nifty holds 17,800 levels on downside."

India VIX declined by 2.07 per cent to 15.77 level. The volatility index remained range bound near 16 level, while the markets remained buoyant and surpassed all major Call bases. Put writing activities increased further at ATM strikes as no major dip is being seen in the markets. Thus, closure of positions among Put options will be crucial to watch for the volatility index to move higher.

"Implied volatility of Calls closed at 14.37 per cent, while that for Put options closed at 14.85. The Nifty VIX for the week closed at 16.10 per cent. PCR of OI for the week closed at 1.64," said Bisht.

FIIs remained active last week and sold at higher levels. FIIs sold Rs1,710crore during the week. On a monthly basis, FIIs remained net sellers in the secondary markets to the tune of Rs155 crore. On the other hand, domestic institutions (DIIs) also remained sellers and sold Rs1,713crore in equities last week.

As per ICICI Direct.com data, in the F&O space, FII activity concentrated on the index options segment. With the Nifty making fresh lifetime highs on a regular basis, FIIs remained cautious. FIIs bought Rs1,401-cr index futures and sold to the tune of Rs2752-crore stock futures and Rs822-cr index options.

Bank Nifty

NSE's banking index closed the week at 39,340.90 points, a net loss of 1,565.65 points or 4.14 per cent, from the previous week's closing of 37,775.25 points. "Bank Nifty moved above 39,300 level. Rally was also well supported by leading Banking names like HDFC bank, ICICI Bank and SBI," remarked Bisht.

The data from ICICI Direct.com further indicates shifting of money inflow to the banking space last Thursday as sectoral rotation took place. Technology stocks witnessed selling after their second quarterly numbers. It should keep the momentum intact and the Bank Nifty should head higher.