Options data holds range-bound trading

Based on the options data on NSE, after trading hours on Friday (July 23), the resistance level remained at 16,000 strike and support level declined marginally by 100 points to 15,800 strike indicating range-bound trading for the week ahead (July 26-30). Derivatives analysts see stock-specific triggers as rollover activity picking up pace. Despite breaching 15,600 level intraday, the NSE Nifty moved back to its consolidation range of 15,600 to 15,900 points again.

The 16,000 strike continued to hold the highest Call OI for a second consecutive week followed by 15,800/ 16,100/ 16,200/ 16,500 strikes. Further, 16,000/ 15,900/16,100 strikes recorded reasonable addition of Call OI. Coming to Put side, highest Put OI was seen at 15,800 strike followed by 15,700/ 15,500/ 15,600 strikes. 15,800/15,850/15,900 strikes witnessed reasonable build-up of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Put writers added hefty Open Interest at 15,800 strike, while Call writers held maximum Open Interest concentration at 16,000 strike."

On the options front, the options activity is concentrated at ATM strikes of 15,800 for both Call and Put. While the highest Call base is at 16000 strike, Put base is highest at 15800 strike. Hence, prima facie, a move below 15750 should trigger downside towards 15500. On the higher side, we believe retesting of last week's high itself may trigger short covering momentum, which may take the Nifty towards 16,200 level, according to ICICI Direct.com. "Indian markets witnessed mixed moves in the week gone by as tug of war between bulls and bears kept Nifty in range of 15,550-15,900 points," added Bisht.

BSE Sensex closed the week ended July 23, 2021, at 52,975.80 points, a net loss of 164.26 points or 0.30 per cent, from the previous week's closing of 53,140.06 points.

Registering a decline of 67.35 points or 0.42 per cent, NSE Nifty ended the week at 15,856.05 points from 15,923.40 points a week ago. Bisht forecasts: "From technical front, once again 15,950 would act as a strong hurdle for Nifty, while Bank Nifty is likely to face strong resistance in the 35,400-35,600 levels. For the upcoming week, we expect the market to move in range and trade with sideways bias. Traders should focus on stock-specific moves."

Volatility index slipped below 12 level after testing 14 last week. During the month, on multiple occasions, it found resistance around these levels. Analysts forecast that any move above 14 level for the volatility index should be considered negative. The market is poised for quarterly results from almost 16 index companies, which may trigger some volatility. Despite aggressive profit booking in broader indices, Implied Volatility (IVs) remained muted. This is still pointing towards lack of direction and continuance of trading range. Analysts predict that IVs may remain choppy and unlikely to close above 15 per cent in coming days.

"The Implied Volatility of Calls closed at 11.09 per cent, while that for Put options closed at 12.01 per cent. The Nifty VIX for the week closed at 11.89 per cent. PCR of OI for the week closed at 1.00," observed Bisht.

Bank Nifty

NSE's banking index closed the week at 35,034.40 points, a net drop of 717.40 points or 2 per cent, from the previous week's closing of 35,751.80 points. Banking sector was relatively underperformed last week and moved towards its lower band of the range, while technology stocks have largely compensated.

"Banking index supported the up move in the markets as some buying momentum was seen in stocks like ICICI Bank, Axis Bank and SBI," remarked Bisht.

As per data from ICICI Direct.com, huge Call additions were observed in 35,000 and 35,500 strike Calls. However, sustainability of a move above 35,000 is important to continue the upward bias. In that scenario, the banking index may retest its major hurdle of 36,000 points during settlement. On the lower side, 34500 remains immediate and crucial support for the banking index.

Analysts forecast consolidation for the banking index in coming days and fresh up moves are expected towards 36,000 level.