Options data maintains high level of support

According to the latest F&O data on NSE, the 16,600 strike has the highest call OI, followed by 16,500/ 16,400/ 16,700/ 16,200/ 16,300 strikes, while 16,600/ 16,500/ 16,400/ 16,200/ 16,300 strikes witnessed a reasonable addition of Call OI.

On the Put side, the maximum Put OI is seen at 16,000PE followed by 15,900/15,800/15,700/15,750/15,500/15,400/15,300/15,200/15,100/15,000 strikes. Additionally, 16,000/15,900/15,800/15,700/15,600/15,500/15,20015, 100/15,000 strikes saw a moderate to large accumulation of Put OI.

The sell write is higher than the call strikes with the highest sell base placed at the 16,000 ATM strike. A round of recovery towards 16500 seems possible if Nifty is able to hold 15900 points. The bias will change if the Nifty closes below 15900. In this scenario, Nifty could head towards 15600 in the coming sessions, according to ICICIdirect.com.

Dhirender Singh Bisht, Senior Research Analyst (Derivatives) at SMC Global Securities Ltd, said: “On the derivatives side, Put writers were seen adding large open interests at 15,900 and 16,000 strikes, while the Call writers changed their positions to 16,200 strikes.

The Nifty could see another rally ahead of the crucial events expected in the second half of the month.

“Indian markets remained volatile last week and traded in a limited range as the tug of war between bulls and bears kept Nifty around the 16,000 level. Bank Nifty ended the week below the 35 level. 000, while Nifty closed above the key psychological level of 16,000,” Bisht added.

For the week ended July 15, 2022, BSE Sensex closed at 53,760.78 points, a net decline of 721.06 points or 1.32%, from the previous week’s close of 54,481.84 points . Registering a loss of 171.40 points or 1.05%, NSE Nifty ended the week at 16,049.20 points against 16,220.60 points a week ago.

Bisht predicts: “For the week ahead, we expect markets to trade with a positive bias as long as Nifty holds above the 15900 level. 16,150 could trigger a new round of buying and could take Nifty towards the 16350 level while well.”

On the F&O space, FII net open interest rose again last week as they once again crossed 1 lakh contracts. These additional shorts were seen after the US inflation figures as FIIs sold index futures worth Rs2,600 crores last week. Meanwhile, long positions in equity futures also fell slightly last week and FIIs liquidated positions of over Rs 1,250 crore.

The India VIX volatility index fell 4.05% to the 17.60 level, which is at its lowest level since January below the 18 level. Despite the recent weakness seen in the banking and technology sector, the Nifty has largely been successful in maintaining its levels. While stock-specific volatility may remain elevated through the earnings season, broader weakness is unlikely until VIX does not break above the 20 level.

“Implied call volatility closed at 17.80%, while put options closed at 18.37%. The Nifty VIX for the week closed at 18.34%. more call writing than put writing during the week,” Bisht remarked.

FII again increased their net short positions above 1 lakh contracts. The majority of these positions were formed after US inflation figures. Therefore, these positions are likely to be covered short.

The volatility index remained weak for a second consecutive week, while the FII short position in the index futures segment increased slightly. Now, net FII shorts have moved slightly above one lakh contracts. Closing these positions should trigger significant upside.

Clever bank

The NSE Banking Index closed the week at 34,682.65 points, down 441.40 points or 1.25%, from the previous week’s close at 35,124.05 points. “Bank Nifty also failed to trigger any new moves and ended the week with a loss of around 1%,” Bisht said.

Bank Nifty, after testing its call base of 35,500 last week, failed to maintain its tracking momentum. HDFC Bank and IndusInd Bank were the main drags on the index. A clear underperformance was seen last Friday where, despite the Nifty rising almost 100 points, the Bank Nifty ended slightly negative.

Over the past week, a few call option strikes from Bank Nifty have seen the formation of aggressive write positions. This pushed the index towards its support levels of 34500. The upward movement of the index may continue. Bank Nifty is expected to hold 34,500 on a closing basis and stocks like HDFC Bank, Axis and Kotak Bank are expected to participate. Recently, the Indian Rupee hit a new lifetime low against the US Dollar, which would lead to negative sentiments on the street. However, when it comes to Bank Nifty, a close above 35,000 would help traders regain confidence. This should provide further benefits this week.

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