Offloading OI indicates losing steam in markets

Barring a couple of strikes, most of OTM and ITM strikes witnessed declining OI on Call and Put sides. On Put side, OTM strikes recorded moderate to average addition of Put OI. The dilution of Open Interest (OI) bases points to losing strength of rally and uncertainty among investors, observe derivatives analysts. As per the options data on NSE, the support level declined by 1,000 points to 17,500PE, while resistance level eased marginally by 100 points to 17,40CE.

The 17,500 strike has highest Call OI followed by 18,000/ 17,650/ 18,150/17,700/ 17,500 strikes. 17,500CE recorded maximum Call OI build-up followed by 17,500, while 17,600-18,900 strike range witnessed moderate to average offloading of Call OI.

Coming to Put side, 17,400 and 17,450 strikes recorded maximum Put OI base followed by 17,000/17,300/17,100/17,500 strikes. 17,450PE has reasonable Put OI build-up, while ITM and OTM strike recorded declining Put OI volumes.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, Call writers were seen at 17600 & 17700 strikes and this kept markets under pressure and Nifty ended below 17,500 mark."

ICICIdirect.com analysts that current levels near 17400-17500 should be crucial for the index as the range holds the major Put base for the weekly and monthly settlements. Also, the Open Interest in index futures is relatively low and high basis prevailing in index futures is normalised once again. Moreover, despite recent sell-off among heavyweights, the volatility index is still hovering below 18 and seems like there should be limited downsides from current levels.

The major options bases are at Put 17500 and Call 17700 strikes. Sustainability beyond these levels may trigger further directional move in the index. Hence, a range-bound to positive movement is likely in the index in coming sessions, according to ICICIdirect.com.

Technology heavyweights have witnessed considerable Call writing at ATM strikes, which may keep upsides limited. However, the banking space may continue to outperform and provide support in case of any extended declines. "Once again Indian markets remained volatile in the week gone by and settled marginally lower, as traders remained side line amid long weekend," adds Bisht.

For the week ended April 13, 2022, BSE Sensex closed at 58,333.93 points, a further drop of 1,113.25 points or 1.87 per cent, from the previous week's closing of 59,447.18 points. Registering a continuous fall of 308.70 points or 1.73 per cent, NSE Nifty ended the week at 17,475.65 points from 17,784.35 points a week ago.

Bisht forecasts: "Technically both the indices are still holding well above its long-term moving averages on daily charts. However, secondary oscillators suggest for furthermore consolidation into the prices at current juncture. In upcoming sessions, we expect Nifty to sail in the range of 17350- 17650 levels, while Bank Nifty may find support in zone of 37200 to 37000 range. On higher side, Nifty needs to give decisive move beyond 17700 levels for any further upside into the prices."

The volatility index India VIX declined 2.05 per cent to 17.78 level. "Implied Volatility of Calls closed at 15.93 per cent and Put options closed at 16.79. The Nifty VIX for the week closed at 18.16 per cent, which was slightly lower than the previous week. PCR of OI for the week closed at 1.33," remarked Bisht.

FII activity largely remained muted ahead of quarterly results and in last three sessions of the last week. FIIs sold near Rs1,120 crore. In April so far, FIIs remained net buyers of nearly Rs6,150 crore in the secondary markets suggesting significantly low activity after unabated selling pressure seen in the last six months. At the same time, domestic institutions also remained on sidelines and bought just over Rs366 crore in the truncated week.

In the F&O space, FIIs turned net sellers as net long positions reduced further during the week. They sold index futures to the tune of Rs3,530 crore and Rs3,053 crore in the stock futures segment. Even they were sellers of just Rs238 crore in index options since last Friday.

Bank Nifty

NSE's banking index closed the week at 37,463.40 points, a marginal decline of 288.65 points or 0.76 per cent, from the previous week's closing of 37,752.05 points.

Major Call writing took place at 38,000 strike as it remains hurdle area for Bank Nifty. Despite sharp whipsaws, Put writing positions at 37,000 strike for the coming weekly expiry remained intact. Analysts feel the index remains a buy on dip with 37000 levels as a strong support.

The current Bank Nifty-Nifty price ratio rose marginally during the week. Support for the same stands near 2.11 level. Outperformance will resume again in the index once its closes above 38000 level.