F&O data holds downside support

With Open Interest (OI) of Calls and Puts concentrating at a step higher, the market is expected to witness marginal upside move amid undercurrent positive bias.

Adding to this, high volatility would further widen the trading range. And the market may continue with positive bias, if Nifty holds above 11,000 level, forecast derivatives analysts.

According to ICICI Direct.com, the noticeable Call base of Nifty is placed at 11,300 and 11,500 strikes.

On downsides, 11,000 Put has remained highest despite Nifty moving towards 10,800 levels recently. Analysts believe positive bias may remain intact till Nifty holds 11,000 level.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities, said: "Nifty indices bounce back sharply from its key support levels of 10,800, and ended the week above 11,100 levels on back of sharp short covering.

Hefty Call unwinding at 10,900 and 11,000 strikes was observed along with fresh Put writing, which supported the up move in the week gone by. The options Open Interest concentration is at the 11,200-strike calls with the highest Open Interest of above 21 lakh shares.

Among Put options, the 11,000-strike taking the total Open Interest to 16 lakh shares, with the highest Open Interest among Put options."

Considering the hope rally over a possible booster package announcement by the Centre and high volatility in the markets, the F&O data holds wider range of trading for the week ahead (August 12-16, 2019) amid uncertain global currency markets.

The pep talk resulted in the hope rally that pulled the key indices up for the last two sessions of the previous week ended August 9. This has halted the four-week losing streak.

For the week ended August 9, 2019, NSE Nifty closed at 11,109.65 points, a net gain of 112.3 points or 1.02 per cent, from 10,997.35 points. Registering 463.69 points or 1.24 per cent, BSE Sensex closed at 37,581.91 points as against 37,118.22 points.

"Now, in the coming week, we expect Nifty to trade with sideways bias along some volatility on cards as we have a limited trading sessions.

On higher side, 11,200 will act as a key resistance for Nifty, while on downside 11,000 should act as a strong support," forecasts Bisht.

The Nifty closed the eventful last week with the gains of over one per cent amid recovery in the index heavyweights. It has remained highly volatile and witnessed move of more than 100 points daily throughout the week.

The previous lows near 10,800 were respected twice during the week and bounced back to close near 11,100 levels.

The implied volatility (IV) subsided marginally and despite the recovery it is still trading at 15 levels. Analysts believe that for any sustainable recovery, volatility should subside below 14 per cent. Otherwise, extreme swings may continue in the coming week as well.

Bisht further added that "the implied volatility of Calls was up and closed at 14.39 per cent, while that for Put options closed at 15.07 per cent.

The Nifty VIX for the week closed at 16.09 per cent and is expected to remain volatile. PCR OI for the week closed at 1.12, which indicates OTM Put writing."

Heavily beaten down stocks from Auto and Financial services were the major gainers of the week as short covering helped them to recover significantly from lows.

However, metals and PSU Banks remained under pressure and did not exhibited any sign of recovery. Continued short additions may put further pressure in the stocks.

Bank Nifty

Bank Nifty gained 226.95 point or 0.79 per cent and ended the week at 28,431.90 points from 28,204.95 points. "From technical front, the 28,750-28,800 levels should as key supply zone for Bank Nifty as long term moving averages are placed over there," remarked Bisht.

On the weekly expiry front, additions are seen in 29,000 strike Call, which will be the target going forward and a close above these levels would open more upsides. Put OI concentration is been placed at 28,000 strike.

The NSE banking index may continue its current trend until it continues to trade above 28,000 level.

The current price ratio of Bank Nifty-Nifty has slipped to its lowest levels since May at 2.56 levels.

However, ICICI Direct.com feels outperformance can be seen in banking stocks and the ratio can move higher to 2.60 levels.