Derivatives Outlook : F&O data denotes positive mode

With highest Put Open Interest (OI) positions placing in 11,000-11,700 range, another round of profit booking is expected as majority of the stocks hovering in overvalued zone.

Profit booking may take place in the days to come amid undertone bullish bias in the market, observe derivatives analysts.

After the trading hours on last Friday, 12,500 strike has highest Call OI of over 47 lakh contracts followed by 12,000 strike 13,000 strike and 12,200 strike levels.

Coming to Put side, 11,000 strike has highest OI of over 40 lakh contracts followed by 11,500 strike, 11,700 strike and 11,600 strike levels.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Nifty has again closed near weekly highs, data reflects that at current levels still there is lot of outstanding short position in Nifty and Index Calls and we can expect another round of short covering.

As per current derivative data, Nifty can move towards 11,900-11,950 mark this week as the market undertone remains bullish with support of consistent short covering.

Derivative data indicates bullish scenario to continue with Nifty having multiple strong supports at lower levels around 11,750 and 11,800 spot.

Currently Nifty is moving up, with decent addition in Open Interest and Options Put writing which indicates strength in the current trend.

Option writers were seen active in recent rally as we have seen put writing in 11,700 and 11,600 strikes along with the unwinding in Calls.

Among Nifty Call options, the 12,000 strike Call has the highest Open Interest of more than 40 lakh shares, while in Put options 11,700 strike hold the maximum Open Interest of more than 25 lakh shares."

The steep drop in India VIX index points to short-term stability amid formation of higher base moving upwards. India VIX corrected 41 per cent in just one week.

After witnessing a significant drop to 16.45 per cent on Thursday as the poll result trend almost confirmed a clear victory of BJP, the Volatility Index (VIX), also known as 'fear index' and measures market expectation of volatility, fell 15 per cent on Friday to 15.12 per cent.

The VIX was hovering at 30.18, indicating 44-month high, on Wednesday before the D-Day. The option band hovering in the range of 11,600-12,100 levels.

"The Implied Volatility of Calls closed at 21.73 per cent, while that for Put options closed at 21 per cent.

The Nifty VIX for the week closed at 19.41 per cent and is expected to remain volatile. The PCR OI for the week closed at 0.63, which indicates Call writing," adds Bisht.

For the week ended May 24, 2019, BSE Sensex registered an encouraging gain of 1,503.95 points or 3.96 per cent and closed at 39,434.72 points as against 37,930.77 points on May 17.

Similarly, NSE Nifty closed at 11,844.10 points, a net rise of 565.20 points or five per cent, from the previous close of 11,278.90 points.

The market rally took off February 19, 2019, to the current level resulting in a whopping gain of Rs16.46 lakh crore in market capitalisation.

Market may remain in wait and watch mode till the monetary policy and Budget announcement by the NDA-2.0 government.

"On the technical front 11,750-11,800 spot levels is strong support zone and current trend is likely to continue towards 11,900-11,950," forecasts Bisht.

If Nifty holds above 11,750, Nifty may extend upward movement towards 12,040 level with support seen at 11,650 level.

Indicating positive upward movement, Nifty futures closed at 11,865.

According to ICICI Direct.com, Nifty futures recorded fresh addition of Open Interest to the tune of 20 per cent in the last couple of sessions with increase in premium suggesting fresh long build up.

In the options space, significant writing was seen at OTM Call and Put strikes with highest Call OI placed at 12,000 Call strike.

ATM 11,700 Put now holds one of the highest Open Interest making it crucial support in the near term.

Bank Nifty

Adding 1,762.4 points or 5.98 per cent, Bank Nifty closed the week at 31,212.55 points from the previous week's close of 29,450.15 points.

Options data on ICICI Direct.com indicates fresh OI build-up at 32,000 strike, which is the highest Call base.

On the Put side, 30,500 strike has huge build-up, which is the key support area for the upside to continue.