Put writers shifting to lower bands

The truncated week (Nov 15-18, 2021) witnessed diluting steam in the market as a gamut of factors including inflation pressures and disappointing debut of Paytm dampened the investor sentiment. The options data on NSE is indicating the declining base of Open Interest (OI) on both the sides- Calls and Puts. The resistance level declined by 600 points to 17,900CE and support level eased by 250 points to 17,750PE, as per the options data. Further, several strikes on Calls and Puts witnessed declining OI bases.

The 17,900 strike has the highest Call OI followed by 18,200/ 17,800/18,000/18,300 strikes. Further, 17,800/17,850/17,900/17,700 strikes recorded significant to moderate addition of Call OI, while 17,950-20,000 range witnessed offloading of Call OI.

Coming to the Put side, the 17,750 recorded highest Put base followed by 17,700/ 17,500/17,600/17,400/ 17,000 strikes witnessed reasonable Put build-up, while 17,750 and 17,400 strikes recorded moderate addition of Put OI. Drop in Put OI is seen at 17,800/17,850/ 17,900/ 17,950 strikes.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers added hefty Open Interest at 17,900 & 18,000 strikes, while Put writers were seen shifting to lower bands. Bears clearly dominated the Indian markets in the week gone by as NSE Nifty index hammered down badly and slid below 17,800 mark as well."

For the week ended November 18, 2021, BSE Sensex closed at 59,636.01 points, a net gain of 1,050.68 points or 1.73 per cent, from the previous week's closing of 60,686.69 points. Registering a rise of 337.95 points or 1.86 per cent, NSE Nifty ended the week at 17,764.80 points from 18,102.75 points a week ago.

Bisht forecasts: "From technical front, Nifty slipped back below its 50-day exponential moving average on daily charts, which points towards further weakness in trend for upcoming sessions. The immediate support for Nifty is placed at 17,600 level, below which further weakness can prevail in upcoming sessions. On the higher side, 17900 & 18000 levels now would act as a strong hurdle for Nifty."

India VIX fell 0.82 per cent to 14.86 level. "The Implied Volatility of Calls closed at 12.82 per cent, while that for Put options closed at 14.80 per cent. The Nifty VIX for the week closed at 14.98 per cent and is expected to remain volatile. PCR of OI for the week closed at 0.89," remarked Bisht.

As per the data from ICICIdirect.com, the VWAP of the series is at 17950. Considering settlement week, continued directional move is expected and VWAP level of 17950 should remain a critical resistance for the monthly settlement. On downsides, Nifty may move towards 17500 in the coming sessions.The leverage position in index futures is on the lower side. Despite high volatility, no major addition was observed last week, while cumulative OI in Nifty futures further declined to near one crore shares. Domestic institutions are significantly short in index futures and stock futures, while retail participants took long positions.

In the F&O space, FII activity concentrated in the index options space as the NSE Nifty turned volatile. FIIs bought index futures worth Rs1,345crore and Rs713 crore in stock futures suggesting stock-specific approaches. FIIs also bought index options worth Rs1,053crore.

As per the data from ICICIdirect.com, FIIs reduced the pace of selling and turned net buyers in the equity space. FIIs bought Rs1,429crore during the week. During November, FIIs sold Rs9,200crore in equities secondary markets, but invested Rs22,000 crore in the primary markets. On the other hand, domestic institutions provides some support in declining markets and bought Rs2,892 crore in equities last week

Bank Nifty

NSE's banking index closed the week at 37,976.25 points, a net loss of 757.10 points or 1.95 per cent, from the previous week's closing of 38,733.35 points. "Bank Nifty also ended the week in the red zone with a loss of more than 1.5 per cent," adds Bisht.

For the main expiry, aggressive Call writing blocks were observed in 38,500 and 39,000 strike Calls whereas no major Put writing blocks have been observed as of now. The multiple resistance levels are placed for the Bank Nifty on the higher side and major reversal of current profit booking trend is expected only above 39000 level, according to the data from ICICIdirect.com.

Highest Put base for the index is at 38000, below which more selling is expected. However, as highlighted last week, the Bank Nifty may underperform broader indices, while the current price ratio of Bank Nifty-Nifty, which is near 2.14 level, should slide towards 2.08 level.