Range-bound trading likely

Indicating a possible limited trading range for the week ahead (January 3-7, 2022), the resistance level remained at 18,000CE for the fifth consecutive week, while support level moved up by 800 points to 17,300PE. The Nifty rollover to January F&O series further confirms it as the unwinding in Open Interest indicates some of the longs in benchmark index have not got carried forward. The Nifty Futures began the January derivatives series with an Open Interest of 1.04 crore shares from previous month's 1.33 crore shares in OI.

Highest Call OI is at 18,000 strike followed by 17,500/ 17,400/17,800/17,900 strikes, while 18,000/ 17,800/18,100/17,900/17,7500/ 17,700 strikes witnessed reasonable addition of Call OI.

Coming to the Put side, the 17,300 strike witnessed the highest Put base followed by 17,200/ 17,000/ 17,100/16,800 strikes. Further, strikes 17,300/ 17,350/17,150/17,100/ 17,000/16,300 strikes recorded significant build-up of Put OI.

As per the options data from ICICIdirect.com, NSE Nifty holds highest Put concentration at 17200 strike for the coming weekly settlement, while no major Call base is visible with highest Call concentration placed at the 17400 strike. Hence, positive bias can be maintained till the Nifty holds above 17200 for upside targets of 17500-17600. Move below 17200 may put the Nifty in the consolation mode once again.

With net gain over 24 per cent, the NSE Nifty closed the year 2021 on a positive note. While the index ended the December series near its VWAP levels of 17200, the last session of 2021 (Friday December 31) recorded a gain of 200 points as the Nifty closed the week at 17,354 level. Broader markets continue to outperform the Nifty as small-cap indices gained almost four per cent along with three per cent gain in midcap index during the week.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Put writers were seen adding hefty Open Interest at 17300 & 17200 strikes, while Call writers were observed shifting at higher bands."

"Indian Markets begin new series on a positive note and Nifty ends the last trading session of 2021 above 17,350 mark. The market undertone remains upbeat as healthy buying in heavyweights from metal, auto and banking space supported the rally," adds Bisht. For the week ended December 31, 2021, BSE Sensex closed at 58,253.82 points, a net gain of 1,129.54 points or 1.97 per cent, from the previous week's closing of 57,124.31 points. Registering a rise of 350.30 points or 2.06 per cent, NSE Nifty ended the week at 17,354.05 points from 17,003.75 points a week ago.

Bisht forecasts: "From technical front, once again Bank Nifty has managed to close above its 200-Day Exponential Moving Average, while Nifty has managed to close an inch higher above its short term moving averages. For the upcoming week we expect that the rally in markets is likely to continue towards north and traders are advised to keep a strong vigil on Omicron updates from the domestic front. However, the next immediate hurdle for the Nifty is placed in the 17450-17500 mark."

The January series began with relatively low OI with the Nifty January series OI close to just one crore shares. Unless there's fresh accumulation in OI, major directional move seems unlikely. Moreover, considering the lack of activities from FIIs last week, analysts keeping fingers crossed over whether the selling spree continues in January as well.

Nifty January month rollover is at 79.91 per cent from 82.57 per cent on December series and the three-month average of 79.95 per cent with rollover cost of 64 points. Bank Nifty's January month rollover is at 84.79 per cent versus 83.76 per cent. And the market-wide rollover is at 97.83 per cent as against previous 95.13 per cent.

The volatility index India VIX fell 2.07 per cent to 16.22 level. Volatility may be higher ahead of the upcoming results season, move below 16 may provide fresh upside bias for equities. Sectorally, pharma and FMCG stocks will exhibit outperformance in the near term. The Put-Call Ratio (PCR) in January F&O series began on a lower side at 1.03.

"The Implied Volatility of Calls closed at 15.68 per cent, while that for Put options closed at 16.50 per cent. The Nifty VIX for the week closed at 16.57 and is expected to remain volatile. PCR of OI for the week closed at 1.66," said Bisht.

Bank Nifty

NSE's banking index closed the week at 35,481.70 points, a marginal recovery of 624.65 points or 1.79 per cent, from the previous week's closing of 34,857.05 points. "Bank nifty could face strong resistance in the range of 3575035850," remarked Bisht.