F&O data points to wider range of trading
The truncated week ended June 7, 2019, witnessed a volatile trading as the NSE broad-based index Nifty rose to record high of 12,103.05 on June 5, but couldn't hold above 11,900 level on liquidation of long positions.
The price structure of the Nifty remains firmly positive. Derivatives analysts don't foresee the index breaching the exit poll session low of 11,591 and suggest buying opportunity on every dip for up move towards 12,000 level.
Monthly options data depicts a 1,000 point wide range of 12,500-11,500, while 11,800 level is expected to be an important support in the current move.
Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, observes: "After making all time new high, Nifty was dragged down due to the liquidation of long positions. Recent data has turned cautious and is indicating the probability of further profit booking.
Call writing and Put unwinding are seen in recent trading sessions. Call writers were active in 12,000, 11,900 strike calls indicating limited upside. This clearly indicates a lack of buying interest and discomfort in the market."
For the week, Nifty closed at 11,870.65 points, a net loss of 52.15 points or 0.43 per cent from previous week's close of 11,922.80 points. Registering a minor loss of 98.3 points or 0.24 per cent, the market benchmark BSE Sensex closed the week at 39,615.90 points as against 39,714.20 points.
"The level of 12,000 will remain crucial for this week as indicated by option Open Interest concentration. If Nifty falls below the 11,800 mark, it could correct to 11,700 levels on the back of further selling. On the bounce, the index will face strong resistance at 11,950-12,000 levels," forecasts Bisht.
The 12,000 strike has highest OI of 19.68 lakh contracts followed by 12,100 strike, 11,900 strike and 12,200 strike. Highest Call OI addition was seen at 12,050 strike, 11,900 strike and 11,800 strike. Coming to Put side, highest OI is at 11,800 strike, which has high OI addition as well, followed by 11,700 strike.
Bisht further adds: "The options Open Interest concentration is at the 12,000-strike Call with the highest Open Interest of above 38 lakh shares (current week and monthly expiry) among Put options, the 11,800-strike taking the total Open Interest to 34 lakh shares (current week and monthly expiry), with the highest Open Interest among Put options.
The Implied Volatility of Calls closed at 13.52 per cent, while that for Put options closed at 13 per cent. The Nifty VIX for the week closed at 15.53 per cent and is expected to remain sideways.
The PCR OI for the week closed at 1.39, which is decreasing trend which indicates further Call writing. Next support is placed around 11,800-11,770 levels."
According to ICICI Direct.com, Nifty futures recorded marginal fresh OI build up during the week. Decline in Nifty premium near life-time high suggests prevailing caution in the market.
At the same time, like previous week, significant Call option writing was seen at 12,000 strike indicating limited upsides are expected in near term. Thus, another move above 12000 may trigger a fresh round of upsides.
The Nifty was volatile during the last week after testing life-time high near 12,100. However, it moved back to 11,800 in a couple of sessions.
Bank Nifty
Bank Nifty closed the week at 31,066.55 points, a marginal loss of 308.85 points or 0.98 per cent, from the previous week's 31,375.40 points. The level of 30,500 remains strong support area for Bank Nifty.
For Bank Nifty, weekly data at ICICI Direct.com shows that 31,500 may act as strong support with OI addition over 6.6 lakh, while highest PE accumulation is seen at 30,500 level, which can act as a vital support.
Volatility remained high due to RBI's monetary policy. However, the 25 bps rate cut along with accommodative policy stand did not go down out well with the Street as the domestic bourses witnessed an extended sell-off.
Fresh concerns regarding Dewan Housing Finance have also triggered sharp sell-off among financials.