Options OI bases shifting to lower bands

The latest options data on NSE after Friday’s session is pointing to a drop in Open Interest (OI) bases to Out of The Money (OTM) strikes. The resistance level eased by 200 points to 19,400CE and the support level fell by 100 points to 19,300PE. The 19,400CE has highest Call OI followed by 19,500/ 19,600/ 19,300/ 20,000/ 19,350/ 19,650/ 19,700 strikes, while 19,400/ 19,300/ 19,350/ 19,600/ 19450/ 19,650 strikes recorded significant build-up of Call OI.

Coming to the Put side, maximum Put OI base is seen at 19,300PE followed by 19,200/ 19,250/ 18,500/ 19,000/ 18,900 strikes. Further, 19,250/19,300/ 19,200/19,000 strikes witnessed reasonable addition of Put OI.

Dhirender Singh Bisht, associate vice-president (technical research-equity) at SMC Global Securities Ltd, said: “Analyzing derivatives data, Nifty Call options showed the highest Open Interest at the 19,400 level, while the highest Open Interest for Put options was concentrated around the 19,300 level.”

Call writers were aggressive for the past two weeks due to continued profit booking seen among heavyweights, with the highest Call base placed at 19,400 strike, while the Put bases are relatively lower. Hence, a move above 19,400 should be considered for creating fresh longs in the market.

“Over the past four consecutive weeks, the Indian broader indices experienced declines. The Bank Nifty displayed weaker performance as compared to the Nifty over the same period. With the rupee approaching its all-time low, the market saw some buying activity in IT shares. Notably, the consumer durable and media sectors outperformed. Conversely, profit-taking was observed in commodities, financial services and metal stocks,” added Bisht.

BSE Sensex closed the week ended August 18, 2023, at 64,948.66 points, a further loss of 373.99 points or 0.57 per cent, from the previous week’s (August 11) closing of 65,322.65 points. During the week, NSE Nifty declined by 118.15 points or 0.60 per cent to 19,310.15 points from 19,428.30 points a week ago.

Bisht forecasts: “Looking ahead to the coming week, the Nifty is anticipated to trade within a range of 19,100 and 19,500, whereas the Bank Nifty’s pivotal level in previous weeks was 44,200. The prevailing perspective suggests a sell on rise strategy until the Bank Nifty surpasses the 44,200 level.”

India VIX fell 0.80 per cent to 12.14 level. “Regarding Implied Volatility (IV), Nifty Call options settled at 10.32 per cent, while Put options concluded at 11.03 per cent. Additionally, the Nifty VIX, a gauge of market volatility, ended the week at 12.24 per cent. The Put-Call Ratio of Open Interest stood at 1.04 for the week,” remarked Bisht.

The volatility index rose gradually in the last two weeks towards 12 level. But it failed to move beyond it despite many attempts. Consolidation is likely to continue till IVs are below these levels. Only a move beyond 12, extended weakness might be seen in the headline indices.

FIIs went on for a long liquidation in later part of July and were turned net sellers in the index futures as their net shorts rose to 35,000 contracts. Further, FIIs resorted to selling in the stock futures space and their net shorts are one of the highest net shorts seen recently. Derivatives analysts observe that change of bias in stock futures is important for recovery.

Bank Nifty

NSE’s banking index closed the week at 43,851.05 points, a net fall of 348.05 points or 0.78 per cent from the previous week’s closing of 44,199.10 points. “Considering OI, the expected trading range for the Bank Nifty is projected to be between 44,000 and 43,800. The 44,000 level has played a significant role in recent weekly expiries and remains crucial for upcoming expiries,” observes Bisht.