Options data holds range-bound upward bias

The latest options data after last Friday's session on BSE points to resistance level at 19,000CE for a fifth consecutive week, while the support level moved up by 400 points to 18,700PE. It's indicating the narrowing gap of upward movement on the domestic bourses.

The 19,000CE has highest Call OI followed by 18,800/ 18,700/19,300/ 19,800/ 19,100 strikes, while 18,700/ 18,800/ 19,000/ 18,900/ 19,200/ 19,500 strikes recorded hefty build-up of Call OI.

Coming to the Put side, 18,700 strike has maximum Put OI followed by 18,800/ 18,600/ 18,500/ 18,400/ 18,300/ 18,200/ 17,800/ 17,500 strikes. Further, 18,700/ 18,600/18,500/ 18,300/17,800 strikes witnessed reasonable addition of Put OI.

Nifty is hovering at its one of the lowest volatility post-pandemic phase. Hence, a further round of upward movement in volatility can't be ruled out and it may trigger some profit booking. Also, the prevailing high Nifty premium may also restrict any major upsides as Nifty has not able to perform historically with such high basis. Upsides seen last week can be attributed to MSCI flows.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "The highest Call Open Interest concentration is at 19000 strike followed by 18800 and 18900 strikes, whereas in the case of Put, the highest concentration is at 18700 strike followed by 18500 strike. Near the market psychological level of 19000 and all-time high, Call writers are more aggressive than Put writers."

Hence, continuation of flows should be closely followed for extension of the gains.

Options data further indicates that heavy OI build-up in Call strikes is indicating possible limited upsides. The highest Call base is placed at 18800 strike with 85 lakh shares, making it hurdle for the coming week. At the same time, Put base is visible at 18500 strike. Hence, a retesting of 18500 levels can't be ruled out.

On December 1, BSE Sensex and the broad-based Nifty recorded their lifetime highs of 63,583.07 and 18,887.60 respectively.

"Nifty spot touched all-time high last week and was able to close above its previous all-time high peak, whereas Bank Nifty already had been trading above its previous all-time peak. Metal and Infrastructure were major gainers last week whereas financial services stocks were laggards. Due to low volatility in the market, the intraday movement in Nifty was less as compared to the previous weeks, however, an overall movement in the index was positive," adds Bisht.

BSE Sensex closed the week ended December 2, 2022, at 62,868.50 points, a further recovery of 574.86 points or 0.92 per cent, from the previous week's closing of 62,293.64 points. NSE Nifty ended the week at 18,696.10 points, higher by 183.35 points or 0.99 per cent, from 18,512.75 points a week ago

Bisht forecasts: "Technically both the indices are maintaining their uptrend on the charts, whereas some sort of profit booking is seen at a higher level. We expect Nifty to test support around 18500-18600 whereas on the upside resistance is placed around 18900-19000 levels."

Fear gauge India VIX rose 0.67% to 13.45 level.

"For the last two months, India VIX has been in correction mode resulting in a decrease in the premium of options. Implied Volatility (IV) of Calls closed at 10.99 per cent, while that for Put option, it closed at 12.07 per cent. The Nifty VIX for the week closed at 13.66 per cent. PCR of OI for the week closed at 1.46," observes Bisht.

Moreover, the FIIs net longs are at one of the highest seen in last few years. Hence, a liquidation risk may put some pressure on index.

Bank Nifty

NSE's banking index closed the week at 43,103.75 points, a further recovery of 119.80 points or 0.27 per cent, from the previous week's closing of 42,983.95 points.