Scattered OI Bases Point To Sideways Trading

The resistance level remained unchanged with the highest Call Open Interest (OI) at 25,000CE for a second consecutive week. The support level fell by 1,400 points to 21,600PE, according to the latest data available on NSE.

The 25,000CE had the highest Call OI, followed by 26,500/26,000/ 25,500/ 25,200/ 24,700/ 24,700/ 24,600 strikes. Meanwhile, 26,500/25,000/24,550/24,500/24,000/24,200 strikes witnessed a reasonable addition of Call OI. Only Call ITM strikes 23,800/23,750/23,700/23,550 /23,350 posted moderate OI declines.

On the Put side, maximum Put OI was observed at 21,600PE, followed by 22,500/22,500/23,000/22,000 strikes, which recorded a modest build-up of Put OI. Further, 23,300/22,500/23,000/23,500/21,600 strikes clocked marginal additions of Put OI. Negligible OI declines were seen at a few strikes in the ITM and OTM range.

Dhirender Singh Bisht, Associate Vice President (Technical Research-Equity) at SMC Global Securities Ltd, stated: “Looking at Nifty’s derivatives data, the highest Call Open Interest was observed at the 24,000 and 24,200 strikes, while Put writers were at the 23,500 strike.”

Due to unabated indecisiveness in the market, no major option writing is visible near ATM strikes, and the highest Call base is at the 25,000 Call strike. While 21,500 Put holds maximum OI, analysts forecast that any fall below it may extend further weakness.

“Both the broader indices, Nifty and Bank Nifty, closed with an approximate one percent gain on the weekly chart. Auto and Pharma sectors were the major gainers, while profit booking was observed in the Media and Metal sectors last week,” added Bisht.

For the week, BSE Sensex closed at 78,699.07 points, a modest recovery of 657.48 points or 0.84 percent from the previous week’s closing of 78,041.59 points. NSE Nifty also climbed 225.90 points or 0.95 percent to 23,813.40 points from 23,587.50 points a week ago.

Bisht forecasts: “Traders are advised to closely monitor the position build-up throughout the month, as it may give clearer insights into the direction the market will take for Bank Nifty. For the upcoming sessions, Nifty has support at 23,500 and may face resistance at 24,200.”

OI in Nifty futures rose throughout the week along with increasing short positions from FIIs. This suggests fresh short build-up along with cash-based selling pressure. Considering the truncated next week, short covering should be expected only if Nifty moves beyond the 24,000 level once again.

India VIX further fell and closed the December series below 15 level as India VIX fell 5.68 percent to 13.24 levels. “Implied Volatility (IV) for Nifty’s Call options settled at 13.58 percent, while Put options concluded at 14.72 percent. The India VIX, a key indicator of market volatility, concluded the week at 14.04 percent. The Put-Call Ratio of Open Interest (PCR OI) stood at 0.87 for the week,” said Bisht.

“The rollover rate of Nifty decreased to 77.66 percent, which is lower than the previous month’s rate, but aligns closely with the three-month average of 76.99 per cent. This indicates that the momentum for the January series is likely to follow a similar pattern to that of the December series, implying consistent market behavior. In contrast, the rollover rate for Bank Nifty is 67.81 percent, significantly lower than the previous month’s rate of 76.82 percent and also below the three-month average of 71.02 percent. This sharp decline suggests weaker momentum for Bank Nifty in the upcoming series,” elaborates Bisht.

Fresh short additions were seen in the F&O space during the last week, and net shorts by FIIs rose to 1.5 lakh contracts from net shorts of 60,000 in the previous week. Retail participants increased their long bets once again to nearly 2.25 lakh contracts.

Bank Nifty

NSE’s banking index closed the week at 51,311.30 points, higher by 552.10 points or 1.08 percent from the previous week’s closing of 50,759.20 points. “For the Bank Nifty, the highest Call Open Interest was at the 52,000 strike, while for Put Open Interest concentrated at the 51,000 strike,” remarked Bisht.