Options data points to underlying weakness

The narrowing gap between the support and resistance levels indicates a consolidation range for the week ahead (February 7-11, 2022). The resistance level has decreased by 1,200 points at 17,800 CE and the support level has increased by 1,000 points at 17,500 PE.

17,800 has the highest Call OI followed by 18,500/18,000/17,600/17,700/19,000 strikes. Additionally, 17,800/18,000/18,500/18,400/17,600 strikes saw a significant increase in Call OI.

On the Put side, the maximum Put base is 17,500 strikes followed by 17,400/ 17,000/ 16,800/ 16,800/17,400 strikes. 16,500/16,700/17,200/17,200 strikes witnessed a reasonable accumulation of Put OI. The low open interest seen in the February series continued as no major OI additions were also seen last week. Nifty OI’s current series for February is still below a crore of shares. Meanwhile, FII short positions continue to rise and are at their all time high

since March 2020, which could cushion declines in terms of short coverage.

Dhirender Singh Bisht, Senior Research Analyst (Derivatives) at SMC Global Securities Ltd, said: “On the derivatives side, call writers were seen adding big open interest at 17,600 and 17,700. strikes, while the marginal selling write was seen at 17,500 and 17,400 strikes. ”

According to ICICIdirect.com, NSE Nifty holds the highest concentration of put options at the 17500 ATM strike while the concentration of call options is placed at 17800 strike fr the upcoming weekly settlement. The concentration of call options is much higher than the Put for the week ahead, suggesting limited upside. Nifty may consolidate for a while after witnessing significant volatility over the past month.

“Indian markets ended the week on a positive note as Nifty closed just above the 17,500 mark after a volatile session throughout the week. The tug of war between bulls and bears kept market volatility,” Bisht said.

For the week ended February 5, 2022, BSE Sensex closed at 58,644.82 points, a further net loss of 1,444.59 points or 2.52%, compared to the previous week’s close of 57,200.23 points. Registering a decline of 414.35 points or 2.42%, NSE Nifty ended the week at 17,516.30 points against 17,101.95 points a week ago.

Bisht forecast: “From a technical standpoint, Nifty and Bank Nifty are still holding well above their long-term moving averages on the daily charts. are trading volatile and may consolidate in a wider range. . Nifty may find support in the 17400 – 17250 area while the 17700 and 17800 levels would be strong hurdles for the week ahead.”

The India VIX volatility index fell by 1.37% to reach the level of 18.90. On the volatility front, the EU budget also turned out to be a non-event. In a context of high volatility, the Nifty remained almost stable. While India’s VIX has slipped back below 20 levels, it could decline further in the coming weeks in line with global markets and a new negative bias should only form if it holds above 20 levels, according to ICICIdirect. .com.

“Call implied volatility closed at 17.78%, while put options closed at 18.56. The Nifty VIX for the week closed at 19.16%. week closed at 1.48,” Bisht added.

FII activity has decreased significantly in the F&O space. FIIs were net buyers of equity futures. As Nifty moved towards 17,700 points, FII bought index options worth Rs 5,495 crore and also bought Rs 4,377 crore in equity futures, while selling contracts index futures Rs335-cr.

Clever bank

The NSE Banking Index closed the week at 38,789.35 points, a sharp recovery of 1,099.95 points or 2.91%, from the previous week’s close of 37,689.40 points. “Bank Nifty, however, outperformed Nifty and ended the week with gains of over 2.5%. However, the Bank Nifty charts look very promising comparatively as it can be seen trading in a rising channel with a higher bottom pattern forming,” Bicht remarked.

The Bank Nifty-Nifty price ratio rose further towards 2.22 last week. The ratio could approach the 2.27 level in the short term before any intermediate correction. The continued underperformance of the tech space could drive this relative outperformance, according to ICICIdirect.com.

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