Put writers turn more aggressive

The resistance level marginal moved down by 100 points to 18,000CE and support level rose by 1,500 points to 16,500PE. Derivatives analysts see aggressive bets by Put writers and forecast undertone bullish bias for the week ahead (April 4-8, 2022). The 18,000CE has the highest Call base followed by 17,600/17,00/18,500/18,100 strikes. Marginal to modest Call OI build-up was seen at 18,000/17,800/ 17,600/17,800/18,300 strikes. Coming to the Put side, maximum Put OI is at 16,500/ 16,000/17,000/ 16,900/ 16,300 strikes. 16,500/17,000/ 16,300/16,200 strikes witnessed reasonable addition of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, after trapping the 17500 Call writers in last expiry, now in current expiry this level would work as a strong support. The range of the current week expiry is 17500 and 18000 levels where the option writers are most active. Put writers are more aggressive then the Call writers; Hence, the undertone is bullish."

Nifty for March derivatives series gained 4.85 per cent and Bank Nifty recorded a modest gain of 0.18 per cent. Nifty rollover to April derivatives series was 82.12 per cent as against previous 77.22 per cent and three-month average of 76.92 per cent. And the Nifty rollover cost was 797 points. OI rose by three per cent in Nifty and it's indicating carried forward of long positions to the April F&O series.

"We have observed positive rollover in April series in most of the stocks and index as well. On a weekly basis, Nifty gained more than three per cent whereas Bank Nifty outperformed and extended its gains to end the week with gains of more than four per cent. Buying was seen in all the sectors except IT and pharma," remarked Bisht.

For the week ended April 1, 2022, BSE Sensex closed at 59,276.69 points, a heavy recovery of 1,914.49 points or 3.33 per cent, from the previous week's closing of 57,362.20 points. Registering a loss of 517.45 points or 3.01 per cent, NSE Nifty ended the week at 17,670.45 points from 17,153 points a week ago.

Bisht forecasts: "For the upcoming week, we expect markets to remain in bullish territory as bias is likely to remain in favour of bulls. The 17500-17400 zone is likely to give support to Nifty."

According to sharekhan.com, Nifty futures began the April F&O series with an open interest of 1.86 crore shares versus 1.16 crore shares in OI. The April series started with Rs204,084 crore versus Rs172,948 crore in stock futures, Rs32,673 crore versus Rs18,987 crore in Nifty futures and Rs.717,044 crore versus Rs304,509 crore in index options and Rs15,00,898 crore versus Rs350,203 crore in stock options.

Volatility index India VIX declined 10.34 per cent to 18.44 level. "India VIX cooled off and closed near its weekly low. Implied Volatility of Calls closed at 19.50 per cent, while that for Put options, it closed at 21.08 per cent. The Nifty VIX for the week closed at 20.56 per cent and is expected to cool off in the upcoming week. PCR of OI for the week closed at 1.34," observed Bisht.

The Put-Call Ratio (PCR) in the April series began on a strong note at 1.04. On the other hand, the volatility index in March series was inching lower currently hovering at 20.56 per cent. Seeing the above data, with a significant drop in the India VIX, which is a sign of recovery, it is advisable to hedge against long positions.

A fresh upside in Nifty could only get triggered above 17800, however if 16000 is taken out, then one might see a deeper correction in terms of profit booking till 15500 levels. If data in the Bank Nifty surprises us on the negative side and drop below 35000-34500 along with short capitalisation, it can also see long unwinding, according to sharekhan.com

Bank Nifty

NSE's banking index closed the week at 37,148.50 points, a hefty rebound of 1,738.40 points or 4.90 per cent, from the previous week's closing of 35,410.10 points. "For banking index, 36500 would act as strong support," said Bisht.

Bank Nifty rollover was at 91.46 per cent from 76.23 per cent and three-month average of 76.23 per cent. The market-wide rollover stood at 87.37 per cent from 88.49 per cent. Bank Nifty rollover cost was 180.35 points. However, Bank Nifty recorded a four per cent decline in OI along with easing prices and it indicates long unwinding. Further analysts see shorts carried forward to the April F&O series.