Options data holds strong support levels

F&O At A Glance

• FPIs engaged in delivery-based buying
• Foreign funds holding net longs in both index and stock futures
• Net longs in Index futures near 50,000 contracts
• Nifty OI rose sharply last week to 1.5 crore shares

The 22,000CE has highest Call OI followed by 21,500/ 22,500/ 21,400/ 21,300/ 21,900/ 21,800 strikes, while 22,500/ 22,400/ 22,000/ 21,800/ 22,000 strikes recorded reasonable addition of Call OI. Coming to the Put side, the maximum Put OI is seen at 21,000PE followed by 20,800/ 20,500/ 21,300/ 21,400/ 21,100/ 20,900 strikes. Further, 21,200/ 21,300/ 21,400/ 21,150/ 20,800/ 20,700/ 20,500 strikes witnessed major build-up of Put OI.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “From the derivatives front, Call writers were seen adding Open Interest at 21,500 strikes, while consistent Put writing was observed at 21300, 21200 & 21000 strikes.”

Sharp uptick triggered significant closure among option writers and reasonable Call bases are visible near the ATM strikes. Notable option bases are placed at 21,300 and 21,200 and 20,800 Put strikes which are likely to act as immediate support levels for Nifty. Nifty revisiting these levels is more possible this week.

“Indian markets remained choppy in the week gone by as a lot of intraday volatility was observed in both Nifty and Bank Nifty indices. Nifty marked its record highs, while Bank Nifty remained under pressure during the week and settled the week with a cut of more than a percent. The bullish moves were supported by IT, Reality, Metal and energy counters, while the banking counter was seen trading under pressure,” added Bisht.

BSE Sensex closed the week ended December 22, 2023, at 71,106.96, a net fall of 376.79 points or 0.52 per cent, from the previous week’s (December 15) closing of 71,483.75 points. During the week, NSE Nifty too fell by 107.25 points or 0.49 per cent to 21,349.40 points from 21,456.65 points a week ago.

Bisht forecasts: “However, the bias is likely to remain in favour of bulls, so any dip into the prices should be used to create fresh longs as ‘buy on dips’ strategy is likely to continue to drive investors during the week as well. The immediate support for the Nifty lies in the range of 21,100-21,000 zone while on the higher side 21,500-21,700 zone would act as an immediate hurdle for the markets.”

According to ICICIdirect.com data, along with the delivery-based buying, FPIs remain holding net longs in both index and stock futures. Despite marginal closure seen in the early part of the series, the net longs in Index futures remained near 50,000 contracts. Open Interest in Nifty rose sharply last week to 1.5 crore shares. Hence, a round of liquidation can’t be ruled out. After a sharp up move in the last three weeks, the markets may ease off.

“Implied Volatility (IV) for Nifty’s Call options settled at 12.39 per cent, while Put options concluded at 13.04 per cent. The India VIX, a key indicator of market volatility, concluded the week at 13.76 per cent. The Put-Call Ratio of Open Interest (PCR OI) stood at 1.19 for the week as the volatility is on a higher side, we advise traders to maintain extra caution, while selecting stock and sector-specific moves,” observes Bisht.

Bank Nifty

NSE’s banking index closed the week at 47,491.85 points, lower by 651.70 points or 1.35 per cent from the previous week’s closing of 48,143.55 points.