OI base indicates consolidation ahead

Indicating narrowing down of trading range, the resistance level fell modestly by 200 points to 17,800CE, while support level remains at 17,000PE as per the latest options data from NSE. The options data points to continued Put writing at ATM and OTM strikes with 17600 Put holding the highest Open Interest, while the highest Call OI base is also placed at ATM 17,700 strike. The OI concentration indicates some consolidation in NSE Nifty.

The 17,800CE strike has the highest Call OI followed by 18,000/17,700/ 7,900/ 18,500/ 18,250/ 18,200strikes, while 17,000/ 18,000/ 18,250/ 18,300/ 18,500/ 17,700 strikes witnessed significant build-up of Call OI.

Coming to the Put side, maximum Put OI is seen at 17,000 followed by 17,500/ 17,600/ 17,400/ 17,300/ 17,200/16,900/16,800 /16,700 strikes recorded major addition of Put OI.

As per ICICIdirect.com, Nifty futures Open Interest remained low near one crore shares and only marginal additions of long positions were seen last week. With subdued OI, a sharp move seems unlikely. On the other hand, the banking space has seen significant long accumulation, which has been the driver of the recent up move in the Nifty.

For the week ended August 12, 2022, BSE Sensex closed at 59,462.78 points, a further recovery of 1,074.85 points or 1.84 per cent, from the previous week's closing of 58,387.93points. Registering a continuous rebound of 300.65 points or 1.72 per cent, NSE Nifty ended the week at 17,698.15points from 17,397.50 points a week ago.

However, considering continued buying interest from FIIs, long positions should remain intact till the Nifty breaches its major Put base.

Volatility index India VIX fell 4.07 per cent to 17.61 level. India VIX declined sharply last week after US inflation numbers as the Nifty was able to test 17,700 level. From the highs near 20 level, it declined to 17.60 as options writers have moved at ATM strikes. Going ahead, derivatives analysts don't see much negativity in data and expect the Nifty to consolidate.

On the F&O front, the last witnessed moderate FII activity net longs rose marginally on a weekly basis. FIIs bought nearly Rs1,000crore in index futures. FIIs increased their net longs in stock futures as they bought Rs1,800crore in the segment. Major buying was seen in the options space as FIIs bought Rs5,000crore last week.

Bank Nifty

NSE's banking index closed the week at 39,042.30 points, a gain of 1,121.70 points or 2.95 per cent, from the previous week's closing of 37,920.60 points.

The ICICIdirect.com data further indicates the sharp rise in leverage positions during the last week and as the week progressed fresh long OI blocks were seen in the index. Now, Bank Nifty OI is near its June levels, which is still lower compared with the few previous months. Hence, long participation in the index should continue with the index likely to head towards 40,000 level.

On the option side, Put writing positions have moved higher to 38000 strike, which is likely to act as a support. Any retracement towards this level remains a buying opportunity. Call OI blocks are placed at 39000 and higher strikes. The index managed to close above 39000 levels last week and more momentum is expected in coming days.

Due to recent outperformance, the current price ratio of Bank Nifty/Nifty has moved higher to 2.20 levels. With expectation of outperformance in the Bank Nifty, the price ratio should move towards 2.22 level.