F and O data points to aggressive short buildup

The options data holding the same resistance level as the concentration of Call OI remained at 12,000 strike for the fourth successive week, while Put base shifted lower to 11,000 strike from 12,000 strike. This is indicating support level moving drastically to lower level, observe derivatives analysts. The 11,000 strike Put holds the highest OI for coming week whereas positions are also seen in 10,800 and 10,700 strikes indicating a move below 11,000 would open more downside levels.

The 12,000-strike recorded highest Call OI base of 20.20 lakh contracts followed by 11,500 strike with 19.08 lakh contracts, 11,800 strike with 18.37 lakh contracts and 11,700 strike with 17.49 lakh contracts. Highest Call OI buildup of 17.03 lakh contracts was seen at 11,500 strike followed by 11,400 strike with 11.21 lakh contracts. Coming to Put side, the 11,000-strike witnessed highest OI of 14.06 lakh contracts followed by 11,200 strike with 7.74 lakh contracts and 11,300 strike with 7.56 lakh contracts.

Maximum Put OI buildup of 4.97 lakh contracts at 10,800 strike and 4.73 lakh contracts at 11,000 strike were recorded. Highest Put OI offloading was witnessed at 11,500 and 11,600 strikes of 5.20 lakh contracts and 4.21 lakh contracts respectively. Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, bears took full charge over the street as major Call writing was observed at 11,400 and 11,500 strikes," added Bisht.

The NSE Nifty began the March derivatives series with a higher OI base whereas rollovers were at 77 per cent, which is much higher than its three months' average rollover. The heavy selling spree during the week pushed the Nifty into a discount of 40 points, which is confirming aggressive short formation.

FPIs remained in negative mode as they increased cash-based selling. In the index future segment, they have an open short exposure of 1.34 lakh contracts, which may keep the index up move in check.

Falling in line with global indices, NSE Nifty tumbled in the bearish trend and slipped below sizeable Put base of 11,500 points in the previous week, which recorded a broad-based selling pulling the Nifty by seven per cent.

Bisht further said: "Indian markets were hammered down badly in the week gone by with Nifty losing more than seven per cent, while Bank Nifty ended the week with nearly six per cent of loss as global markets fell amid rising concern over the outbreak of Corona virus that could turn into a pandemic and derail growth. Nifty also witnessed the worst weekly fall since 2009 on back of long liquidation and heavy short build up."

Suffering biggest weekly loss since 2008, Sensex on October 24, 2008, tumbled by 1,070 points in a single session, BSE benchmark index closed at 38,297.29 points, a huge fall of 2,872.83 points or 9.97 per cent for the week ended February 28, 2020, from the previous close of 41,170.12 points. Similarly, NSE Nifty too tumbled 879.10 points or 7.27 percent, and closed the week at 11,201.75 points as against last week's at 12,080.85 points. The week witnessed erosion of Rs11.03 lakh crore of investors' wealth as market capitalization (mcap) declined to Rs147 lakh crore.

Bisht forecasts: "From technical front, both the indices slipped well below their 200-day exponential moving average on daily interval, which added further sell off into the markets. For coming week, we expect markets to remain under pressure once again as heavy short buildup was observed last week which could keep any upside under cap." The Implied Volatility (IV) rose above 23 level for the first time in the past 12 months. "The Implied Volatility of Calls closed at 20.01 per cent, while that for Put options closed at 21.04 per cent.

The Nifty VIX for the week closed at 22.87 per cent and is expected to remain volatile. PCR OI for the week closed at 1.23. We advice traders to remain on cautious note, while creating any long positions as both technical and derivative indicators suggest for further downside into the prices with huge volatility on the cards," said Bisht.

Bank Nifty With a fall of 1,795.7 points or 5.80 per cent for the week, Bank Nifty closed at 29,147.15 points as against 30,942.85 points. The Bank Nifty breached the October 2019 level as outbreak of Coronavirus dampened the market sentiment globally. As a result, all the banking stocks private and PSU banks recorded aggressive profit booking. The Bank Nifty commenced the March futures and options (F&O) series with a higher OI base along with a sharp fall in the rollover spread indicating short rollover. Analysts expect that the short positions may influence the markets in the coming sessions. If the short positions not closed, then the choppiness will continue, forecast analysts.

The highest Put base formed at 29,000. Below this, additions are seen in 28,500 strike. The Bank Nifty declined to its sizeable Put base of 29,000. A close below this level would open more downsides. However, Call OI blocks in 29,500 and 30,000 strikes are likely to keep the index up move in check.