F&O Data Holds Rising Support and Resistance Levels
After remaining at 18,000 CE for six weeks, the resistance level rose 1,000 points to 19,000 CE, while the support level rose 500 points to 18,000 PE. During the previous week, the resistance level became the support level. The latest options data on NSE points to positive movement for the week ahead (January 17-21, 2022). Call and sell bases remain highest at 18200 strike, above which NSE Nifty closed. This suggests some consolidation in the index. A consolidation cannot be ruled out after a sharp rise of more than 900 points in January. At the same time, given the current dynamics of mid and small caps, analysts expect the focus to be on equities ahead of the Union budget.
The highest call OI is observed at 19,000 keystrokes followed by 18,800/18,300/18,700/18,400 keystrokes. Additionally, 19,000/18,200/18,800/18,400/18,650 strikes saw a strong Call OI accumulation.
On the Put side, the 18,200 strike witnessed a maximum base Put OI followed by 18,000/17,900/18,100/17,800/17,700 strikes. Other strikes 18,200/18,000/ 17,900/ 18,100/18,150 also attracted a significant addition from Put OI.
Dhirender Singh Bisht, Senior Research Analyst (Derivatives) at SMC Global Securities Ltd, said: “On the derivatives side, Call and Put writers remained active at 18,200 strikes, while 18,000 strikes had a peak concentration of open interests of nearly 46 lakh shares in Puts.
According to ICICIdirect.com, despite the sharp move, OI in the Nifty remained subdued near a crore of shares and only the FII segment is net long in index futures. A further addition is crucial for a new movement in the index. Meanwhile, given large retail and proprietary client positions, stock-specific moves are likely to continue.
“The nifty index ended in green territory for the fourth straight week as the banking, IT and reality counters supported the rise in the past week,” Bisht added.
For the week ended January 14, 2022, BSE Sensex closed at 61,223.03 points, a net gain of 1,478.38 points or 2.47%, compared to the previous week’s close of 59,744.65 points . Rising 443.05 points or 2.48%, NSE Nifty ended the week at 18,255.75 points from 17,812.70 points a week ago.
Bisht predicts, “From a technical standpoint, Nifty can be seen trading in an uptrend channel with the formation of a higher pattern and should continue its momentum towards the 18,500 level in the coming sessions. On the downside, the 18,100 and 18,000 levels would act as support for the index. We keep our bullish stance intact for the Indian markets and advise traders to use any declines to create new long positions.
The Indian VIX fell 0.90% to the level of 16.56. On the volatility front, the Indian VIX did not drop below the 16 level despite the bullish move and closed the week near 16.5. Before the EU budget, volatility would remain higher, but a positive bias would prevail until volatility remains below 18%.
“Implied call volatility closed at 16.61%, while put options closed at 17.85%. The Nifty VIX for the week closed at 16.71%. The OI PCR for the week closed at 1.67,” Bisht noted.
After the initial spike in volatility, no major uptick was seen in the Volatility Index, while FIIs selling quantum also declined significantly from December.
In the F&O space, FII activity has focused on the index options segment. With the Nifty rallying significantly, FIIs remained cautious. According to data from ICICIdirect.com, FIIs were net buyers of index options worth Rs 1,938 crore and sold Rs 650 crore in equity futures.
The NSE Banking Index closed the week at 38,370.40 points, a marginal recovery of 630.80 points or 1.67%, from the previous week’s close of 37,739.60 points. For Bank Nifty, a strong OI is seen at ATM Straddle of 38500 and this indicates some consolidation near that level. However, the support for the index remains at 38,000, which is the highest selling base. With this support, the index should head towards the 40,000 level on the upside.
Quarterly earnings from banking heavyweights are lined up in the coming days, which should trigger stock-specific action, but looking at the overall closeouts of call write positions, the Bank Nifty should test the 40,000 levels on the upside. . For the January series, Bank Nifty has witnessed close-in futures and the current portion of short hedging may continue.