Options data points to range-bound trading

The resistance level, which remained at 18,000CE for the previous three consecutive weeks, moved up marginally by 200 points to 18,200CE, while the support level rose 700 points to 17,700PE as per the latest options data available after last Friday session on NSE. Open Interest (OI) base on Call and Put strikes indicates range-bound trading for the week ahead.

The 18,200 strike has highest Call OI followed by 18,400/ 17,800/ 18,000 /17,700/17,900 strikes, while reasonable addition of Call OI is seen at 18,200/ 18,500/ 18,300/ 17,800/17,900 strikes.

Coming to Put side, 17,700 strike has maximum Put OI followed by 17,500 /17,800/ 17,600/ 17,100/ 16,900/16,800 strikes. Further, 17,300/17,800/17,600/16,900/16,600/17,500 strikes recorded moderate build-up of Put OI. Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, Put writers are active at 17700 strike followed by 17500, 17600 whereas Call writers are active at 18200 followed by 17800, 17900."

Shrikant Chouhan, head (equity research-retail), Kotak securities Ltd, observes: "Indian equity markets gave positive returns this week, following the trend of major global markets. Amongst sectors, BSE energy, Oil & Gas, Auto and Metal indices led the gains whereas BSE FMGC index saw marginal loss this week. Global central banks' action on interest rates continued with the European Central Bank announcing a 75-basis-point interest rate hike and on the other hand the Bank of Japan remained an outlier as it maintained its ultra-low interest rates policy. US 10-year bond yield saw some softening this week."

"In the last week, both broader indices (Nifty and Bank Nifty) moved inverted in intraday sessions and this confused the traders for direction. On weekly basis, Nifty gained more than one per cent whereas Bank Nifty underperformed the main indices i.e. Nifty. Auto sector outperformed the market whereas pharma was laggard," adds Bisht.

BSE Sensex closed the week ended October 28, 2022, at 59,959.85 points, a further recovery of 652.70 points or 1.10 per cent, from the previous week's closing of 59,307.15 points. NSE Nifty ended the week at 17,786.80 points, higher by 210.50 points or 1.19 per cent, from 17,576.30 points a week ago.

Bisht forecasts: "Technically both the indices i.e. Nifty and Bank Nifty are still trading above 100-Day Exponential Moving Average on daily charts. There is a negative diversion on daily chart in Bank Nifty suggested by RSI oscillator. On the higher side, 41800-42000 will act as a resistance zone whereas 40500-40300 act as support. For Nifty, the 18000 strike will act as a psychological level and above this, the 18,200 strike will act as resistance. On the downside, support is placed at 17500-17300 levels. We expect that volatility is likely to grip Indian markets and bias is expected to remain in favour of bears as far as Nifty holds below 17500 level."

"However, the global situation continues to remain challenging. Over the next couple of weeks, Indian markets will focus on domestic macro data and quarterly results & management commentary will drive stock specific action," remarked Chouhan.

The Nifty began November F&O series with marginal lower OI with Call base remaining intact at 18,000 strike.

The October series witnessed upward movement of Nifty as it closed at 17721 level. Series-on-series, the Nifty closed with a gain of 4.1 per cent.

On the open interest front, the Nifty added 61% and is starting the November series with 117 lakh shares in OI. On the rollover front, the Nifty saw a rollover of 76.05% against previous 78.03% and a 3-month average of 77.61% with a rollover cost of 52.25 points and with an OI addition. With prices closing at highs, it indicates some of the longs in the Nifty have got carried forward.

Volatility gauge India VIX eased 4.07% to 15.92 level. Volatility across the globe declined, where India VIX slipped below 17 per cent mark and moved to April 2022 level. With declining volatility, stability in rupee and no major spike in Dollar index, analysts forecast fresh upsides above 18000 level.

"Implied Volatility of Calls closed at 15.67 per cent, while that for Put options closed at 16.85 per cent. The Nifty VIX for the week closed at 16.60 per cent. PCR of OI for the week closed at 1.34 lower than the previous week," said Bisht.

FIIs covered their net short positions in index Futures segment. Now, they are net long on 25,000 contracts. FIIs increased their long bets in the stock Futures segment, which is now at 1.20 lakh contracts. With their long bets remaining at one month high, the buying momentum is likely to continue. Any dips in the index should be used to create fresh longs.

Bank Nifty

NSE's banking index closed the week at 40,990.85 points, a modest recovery of 206.80 points or 0.50 per cent, from the previous week's closing of 40,784.05 points. Bank Nifty also ended in the positive at 41510 rise sharply by 10.32 per cent in September derivatives series.

The Bank Nifty on the other hand, saw an addition of 40% in open interest with an increase in prices indicating long building seen in the index. The Bank Nifty saw a rollover of 76.73% as against previous 82.02% and 3-month average of 84.35% with rollover cost of 183.85 points. With a low rollover, the Bank Nifty has not got long getting carried forward to the next series.