Nifty in consolidation range with positive bias

The resistance level remained at 16,000 strike for a consecutive second week, while support level moved up by 500 points to 14,500 strike. Holiday-shortened week (Eid-Ul-Fitr on Thursday) may witness Nifty moving in a continued consolidation range. The highest Call OI is seen at 16,000 strike followed by 15,000/15,100/ 15,300/ 15,000/ 15,300 strikes. 14,800/15,100/15,200/15,400 strikes recorded reasonable addition of Call OI. Coming to the Put side, the 14,500 strike has the highest Put base followed by 14000/ 14,600/ 14800/14700 strikes. Other strikes 13800/ 14800/14500/114200 strikes witnessed considerable build-up of Put OI.

The options data holds that the Nifty still has the highest Call base at 15,000 Call strike for the coming weekly settlement. Since mid-March, the Nifty was unable to close above these levels. However, gradual writing at OTM Put of 14,600 and 14,800 strikes suggest limited downsides. Till these levels are held, there is a high probability that the Nifty could move towards 15,200 in the coming sessions.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Highest Call concentration shifted from 15,000 strike to 15,200 strike and some Put writing was seen at 14,500 level, where highest concentration can be seen. Highest Open Interest band for current week is at 15,200 to 14,500 levels. Despite making lows below 14500 in the early part of the week, the NSE Nifty witnessed renewed buying support and rebounded strongly above the 14800 strike. Metals outshone the rest of the sectors in terms of performance as the metal index moved up almost 10 per cent last week. At the same time, midcap, small cap indices also moved up nearly 1.5 per cent each."

"In the week gone by, some rally was seen in Nifty despite negative news flows about Corona spread. NSE Nifty bounced back from lower levels and moved towards 15,000 level. In the past week also some correction was seen from this level. Metal and commodities stocks showed some strength in the market whereas profit booking was seen in PSU Bank," added Bisht.

For the week ended May 7, 2021, BSE Sensex closed at 49,206.47 points, a net recovery of 424.11 points or 0.86 per cent, as against 48,782.36 points. NSE Nifty too recouped by 192.05 points or 1.31 per cent and closed at 14,823.15 points from 14,631.10 points.

Bisht forecasts: "In upcoming week, the 15,000 will play a crucial resistance, which has substantial Open Interest concentration and it is also a psychological level. On the technical front, below 14,700 level, we could witness further selling pressure and it may persist and drag Nifty towards 14,500 zone whereas on upside, the 15,000 level plays as resistance in upcoming week."

Sectorally, apart from metals, the rest of the sectors have remained largely range bound to positive. For the Nifty to move above 15000, the banking index has to lead from front. Analysts predict that after a round of consolidation it is well poised for a further up move. They expect banking space to resume its outperformance once it closes above 34000. However, technology space is likely to underperform. Volatility in the markets declined to 20 level, which is the lowest level for volatility since mid-April. Sustainability of current levels may infuse fresh uptrend in the broader markets in the coming sessions. As suggested earlier, one should be cautious if it starts moving higher once again.

"The Implied Volatility of Calls closed at 20.98 per cent, while that for Put options closed at 21.17 per cent. The Nifty VIX for the week closed at 22.04 per cent. Put-Call Ratio of OI for the week closed at 1.47 and this indicates more Put writing than Calls," remarked Bisht.

In the F&O space, FIIs sold Rs 5,408 crore index futures, bought Rs 2,386 crore stock futures and Rs8,636 crore index options.

Bank Nifty

The NSE's banking index Bank Nifty closed at 32,904.50 points, a net gain of 122.70 points or 0.37 per cent from 32,781.80 points.