Options data holds moderate positive bias ahead of Aug F&O expiry

The latest options data on NSE is pointing to monthly highest Call writing when compared with the Put OI. The options base reflects the consolidation phase for the Indian markets, observe derivatives analysts. The resistance level moved up by 200 points to 18,000CE and support level remained at 17,000PE for a second consecutive week. The August futures and options (F&O) monthly series will expire on August 25 and may result in moderate volatility, add the analysts.

The 18,000CE has highest Call OI followed by 17,900/18,500/18,600/17,800/18,100/17,800 strikes, while 18,000/18,600/18,500/18,300/ 18,100/17,900/17,950/117,800 strikes witnessed significant build-up of Call OI.

Coming to the Put space, maximum Put OI is seen at 17,000PE followed by 17,200/17,500/ 17,600/17,800/18,000/17,100/16,800 strikes. And 17,00/17,200/17,250/ 17,500/ 17,600/ 17,700 strikes witnessed moderate addition of Put OI. Put OI offloading is seen at 17,050PE and deep OTM strikes.

The derivatives segment witnessed significant Call writing at ATM strikes with total Open Interest of more than one crore shares at both 17,900 and 18,000 Call strikes. For the first time during the series, higher Call writing took place than Put bases. Hence, one can expect some consolidation below 18000 during settlement and a fresh up leg may be seen only if the Nifty moves above these levels.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Derivatives data suggests limited upside as of now in index as Call writers added hefty Open Interest at 17900 & 18000 strikes. Put writers, however, were seen shifting at 17500 strike, which should act as a strong support level for Nifty."

"Nifty witnessed heavy writing at 18000-17900-17800 CE option for 25 August expiry, while Put unwinding was at 17700-17600-17400-17300 strikes. On the other side, FIIs unwinded longs on Nifty index Futures and also added shorts for the last two days. This scenario suggests that markets are sell on rise with resistance at 17900 on the upside, while downside is open till 17400 for next week," observes Kush Ghodasara, an independent market expert.

Interest rate sensitives such as banking, auto & realty stocks witnessed heavy profit-taking and halted 7-day winning streak. Investors pressed the sell button after the recent US FOMC minutes indicated that the Federal Reserve may go for rate hikes in its next meeting, which prompted local investors to prune their holdings after the recent run-up.

"Indian markets remained volatile in the week gone by and ended on a flat note after witnessing four consecutive gains. NSE Nifty ended the week above 17,700 mark, while Bank Nifty closed below 39,000 mark on the back of profit booking," added Bisht.

Strong hands booked some profits after a strong move was seen during the series in anticipation of some consolidation.

For the week ended August 19, 2022, BSE Sensex closed at 59,646.15 points, a further recovery of 183.37 points or 0.30 per cent, from the previous week's closing of 59,462.78 points. Registering a continuous rebound of 60.30 points or 0.34 per cent, NSE Nifty ended the week at 17,758.45points from 17,698.15 points a week ago.

Bisht forecasts: "From the technical point of view, the bias would remain in favour of bulls and any dip into prices should be used to create fresh longs. The stock-specific action is likely to remain on radar as Nifty is approaching towards August series expiry. Hence, volatility would continue to grip Indian markets in upcoming sessions as well."

Amol Athawale, deputy V-P (technical research), Kotak Securities Ltd, adds that "technically, the Nifty witnessed profit booking near 18000 level, while on daily charts, the index has formed a long bearish candle and also broke the important support level of 17850 which is broadly negative. In addition, it has also formed Hammer candlestick formation indicating further weakness in the near future. Below 17900, the correction formation is likely to continue and could retest the level of 17600-17500. On the flip side, 17900 –17950 would act as an immediate hurdle for the bulls. Fresh uptrend is possible only if the index clears the resistance of 17950, which could then take it further to 18050-18150 levels." Nifty Futures OI increased sharply over last week to its highest monthly level. FIIs liquidated some longs, and retail participants increased their long positions.

India VIX rose 5.39 per cent to 18.28 level. The volatility index remained sideways and consolidated near the 18 level throughout the week. With the result season almost over, stock-specific activities may remain in focus amid consolidation. Any profit booking should be limited till 17500 level in the settlement week and declines towards these levels remain a buying opportunity. "Implied Volatility of Calls closed at 15.33 per cent, while that for Put options closed at 16.49 per cent. The Nifty VIX for the week closed at 17.35 per cent. PCR of OI for the week closed at 1.21," remarked Bisht.

FIIs remained lower as they reduced net longs marginally on a weekly basis. FIIs sold nearly Rs500 crore in index futures and also liquidated some longs in the stock futures segment to tune of Rs1,000crore. Foreign funds bought Rs19,000crore during the last week, as per the data from ICICIdirect.com

Bank Nifty

NSE's banking index closed the week at 38,985.95 points, a gain of 1,121.70 points or 2.95 per cent, from the previous week's closing of 39,042.30 points.

According to ICICIdirect.com, the Put-Call Ratio (PCR) declined sharply last week and it indicates traders' unwillingness to aggressively write Puts near monthly highs. Bank Nifty OI remained almost flat for the week so no major profit booking or sell-off is expected. Most of the activity happened through options. Also, due to rollover activity, some volatility is more likely. On the upside, 40,000 level to act as a hurdle in the settlement week. Looking at the Put OI blocks, a move towards 38500 or 38000 levels can't be ruled out. However, fresh upsides are expected once the index closes above its Call base of 40000 level.