Sideways trading with positive bias

Options data is pointing to some more consolidation in NSE Nifty, while stock-specific action and sector rotation may remain under focus for the week ahead (March 28-April1, 2022). Based on the latest Open Interest (OI) positions on Call and Put sides, derivatives analysts foresee an immediate trading range of 18,000CE-15,000PE. The resistance level moved up by 700 points to 18,000CE and support level declined by 1,800 points to 15,000PE.The Put-Call Ratio (PCR) of index options is 0.95 and 0.43 for stock options. The PCR is reflecting the undertone caution in the market. Bank Nifty, FinNifty, Concor, Astral, Indus Tower, PVR, MIDCP Nifty, MCX, Adani Ent, Ind Hotel witnessed spurt in OI.

Highest Call base is seen at 18,000CE followed by 18,100/ 18,500/18,200/ 19,000/18,300 strikes. Further, 18,000/18,100/ 18,200/18,500 strikes recorded major to moderate Call build-up. Coming to Put side, the 15,000PE witnessed maximum Put OI followed by 15,500/15,800 /15,900/15,300 strikes. Nominal addition of Put OI is seen at 15,800/15,000/15,400 strikes.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: ""From derivatives front, both Call & Put writers are seen adding Open Interest at 17200 strike. We expect the market to remain sideways in upcoming sessions with bias likely to remain in favour of bulls. Traders should expect some more consolidation in index, while stock-specific action and sector rotation will remain under focus."

During the past few weeks, the derivatives space on NSE recorded Call writing at OTM strikes as markets had remained under selling pressure. However, the course of trading changed during last truncated expiry (March 18 was holiday) where significant Put writing was seen This indicated expectations of limited downsides. A change in bias should be warranted below 16200.

"After two weeks of consecutive gains, NSE Nifty indices took a breather and ended the week with minor cuts. From the domestic front, hike in fuel prices for the third time in a week hurt the sentiments," remarked Bisht. For the week ended March 25, 2022, BSE Sensex closed at 57,362.20 points, a net loss of 501.73 points or 0.86 per cent, from the previous week's closing of 57,863.93 points. Registering a loss of 656.60 points or 3.94 per cent, NSE Nifty ended the week at 17,153 points from 17,287.05 points a week ago. Bisht forecasts: "Technically Nifty is holding above its short and long term moving averages on daily interval, while Bank Nifty is still struggling below its 200 days exponential moving average on daily charts which is placed at 36000 levels."

Volatility index India VIX eased marginally by 2.09 per cent to 23.43, but still hovering at an alarming level for the market. "Implied Volatility of Calls closed at 23.06 per cent, while that for Put options closed at 24.01. The Nifty VIX for the week closed at 23.93 per cent, which was slightly higher than the previous week. PCR of OI for the week closed at 0.97," observed Bisht.

The domestic markets witnessed a strong rally for two weeks and turned sluggish during the last week. The consolidation phase witnessed about one per cent fall as ongoing Russia-Ukraine war and rising crude oil prices impacted the investor sentiment. However, lifting Covid restrictions by the central government boosted market confidence as normal business and industrial activity picked up pushing the GDP growth.

Foreign institutional investors (FIIs) offloaded Rs5,344.30 crore worth of equities and with this, their total selling in March so far was at Rs46,962 crore. On the other side, domestic institutional investors (DIIs) bought Rs2,821 crore equities and this took their total buying support in March so far to Rs34,441crore. Sectorally, cement and banking heavyweights witnessed the highest accumulation of short positions. Hence, these sectors should remain in the limelight in case of short covering. Analysts expect that these sectors may lead in a market recovery.

Bank Nifty

NSE's banking index closed the week at 35,410.10 points, a marginal decline of 134.05 points or 0.36 per cent, from the previous week's closing of 36,428.55 points. "Bank Nifty remained laggard during the week as the index suffered loss of more than 2.5 per cent in the week gone by," added Bisht.