Options data flags extreme volatile trading

Based on the options data after Friday’s session on NSE, the resistance level fell by 1,000 points to 23,000CE, while the support level too declined by a whopping 2,800 points to 20,200PE. This is pointing to a wide-range of volatile trading ahead of Lok Sabha results scheduled on Tuesday (June 4). Heavy Open Interest (OI) addition at deep OTM strikes is further supporting the cautious mode in the market as investors gear up for heavy volatile sessions this week.

The highest Call OI is seen at 23,000CE followed by 24,700/ 24,000/ 23,500/22,500/23,200/ 24,500/ 22,600/ 23,300 strikes, while 23,500/ 22,200/ 24,000/ 23,000/23,200 strikes recorded hefty Call OI build-up. Interestingly, all Call OI strikes recorded modest to heavy addition of OI.

Coming to the Put side, maximum Put OI is visible at 20,200PE followed by 21,000/ 20,800/ 20,500/ 21,500/ 22,500/22,600/ 23,000 strikes. Further, 20,500/ 21,000/ 21,500/22,500/22,600 strikes witnessed reasonable addition of Put OI. Only 2 strikes 23,100 and 23,350 strikes on Put side recorded marginal fall in OI.

Dhirender Singh Bisht, associate vice-president (technical research) at SMC Global Securities Ltd, said: “Analyzing Nifty’s derivatives data, the highest Call writing was observed at the 23,000 and 22,500 strikes, while Put writers were most active at the 22,000 and 22,500 strikes.”

“Over the past week, NSE Nifty index corrected by over 1.5 per cent after reaching to its record highs, while Bank Nifty closed on a flat note. PSU banks emerged as the top performer last week, whereas the IT, energy along with oil & gas sectors lagged behind,” added Bisht.

BSE Sensex closed the week ended May 31, 2024, at 73,961.31 points, a net fall of 1,449.08 points or 1.92 per cent, from the previous week’s (May 24) closing of 75,410.39 points. For the week, NSE Nifty also fell by 426.40 points or 1.85 per cent to 22,530.70 points from 22,957.10 points a week ago.

Bisht forecasts: “Consequently, we can anticipate a directional movement in Nifty following the election results, with Nifty expected to show stronger momentum compared to Bank Nifty. In the upcoming week, Nifty is expected to remain highly volatile on the back of Lok Sabha election results due on June 4.”

India VIX rose 1.77 per cent to 24.60 level. “Implied Volatility for Nifty’s Call options settled at 22.37 per cent, while Put options concluded at 23.54 per cent. The India VIX, a key indicator of market volatility, concluded the week at 24.18%. The Put-Call Ratio of Open Interest stood at 1.25 for the week,” further says Bisht.

Sharp short covering in index futures as FIIs closed one lakh contracts on Thursday alone. FIIs net shorts fell from 2.5 lakh contracts to nearly 16k contracts. Analysts expect this short covering may continue to decline further.

“The rollover rate for Bank Nifty in the June series has declined compared to the previous series, falling from 74.41 per cent to 67.66 per cent. Conversely, Nifty’s rollover rate has increased to 71.76 per cent, surpassing the previous month’s rate and aligning with the three-month average of 71.40 per cent. This indicates sluggish moves in Bank Nifty as for now. However, further developments in data during the month could provide next directional move in Bank Nifty from hereon,” observes Bisht.

Bank Nifty

NSE’s banking index closed the week at 48,983.95 points, marginally up by 12.30 points or 0.02 per cent from the previous week’s closing of 48,971.65 points. “For Bank Nifty, the highest Call Open Interest was seen at the 50,000 and 49,000 strikes, whereas on the put side, it was concentrated at the 48,500 and 49,000 strikes,” remarked Bisht.