Options data holds more put writing

Indicating a lack of clear direction in the market, the resistance and support levels, as per the options data, remained at same levels for the fourth consecutive week.

The highest Call OI is seen at 15,000 strike followed by 16,000 strike, 15,200 and 15,800 strike, while 14,800/ 15,000/ 15,800/ 16,000 strikes recorded reasonable addition of Call OI. Coming to the Put side, the 14,000 strike has the highest Put OI followed by 14,500 strike, 14,300 strike and 13,800 strike. Strikes such as 14,600/ 13,700/13,500/14,250 witnessed significant build-up of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, huge Call writing was observed at 14,800 strike along with Put unwinding which clearly points that bulls are now on back foot and lacks in giving any support to markets."

Based on the options data and long rollover, the NSE Nifty remains in a Buy on Dips scenario and it holds value as long as it's above 14,700-14,800 and next target of 15,500 level is expected in the first half of the March derivatives series.

After witnessing volatile trading in the January F&O series, the February series recorded a lifetime high of 15,431 points in the spot market. It's a month-on-month gain of nine per cent. Rollover in the Nifty to March derivatives series was 78.25 per cent against the three-month average of 77.30 per cent with a rollover cost of 72 points.

The high rollover cost is indicating a clear long rollover in the next series. Open Interest on the Nifty rose one per cent on a series basis, indicating that along with short covering some longs were also seen in the index.

"Indian markets began the March series with a negative impression as bloodbath was witnessed in Friday's session with Nifty and Bank Nifty both slipped nearly four per cent in a single session as a sell-off in bond markets across the globe sparked a rout in global equities," added Bisht.

On the options front, the deep Out Of The Money (OTM) 14,000 strike Put option is highest in OI with 40,429 contracts followed by 13,500 PE with 29,363 contracts. While on the Call side, 16,000 CE is highest in OI with 25,681 contracts followed by In The Money (ITM) Call option of 15,000 strike with 14,158 contracts, according to sharekhan.com.

For the week ended February 26, 2021, BSE Sensex closed at 49,099.99 points, a net loss of 1,789.99 points or 3.51 per cent, as against 50,889.76 points. NSE Nifty fell by 452.15 points or 3.02 per cent and closed at 14,529.15 points from 14,981.75 points.

Bisht forecasts: "For upcoming week, we believe that selling pressure is likely to keep markets under pressure. From the technical front, the 14700-14800 zone is a strong hurdle for Nifty, while we may witness a fresh round of selling in Bank Nifty, if it manages to slide below the 34500 strike."

The Put-Call Ratio (PCR) in the March series began at 1.35 level. The volatility index rose to 25 per cent in the last week of the February series and eased off and currently hovering at 22.89 per cent.

"The Implied Volatility of Calls closed at 21.03 per cent, while that for Put options closed at 23.80 per cent. The Nifty VIX for the week closed at 22.89 per cent and is expected to remain volatile. Put-Call Ratio of OI for the week closed at 1.90," remarked Bisht.

FIIs continued to be net buyers in the cash market as they bought Rs 50,339 crore due to some big block deals. On the Derivative front also, FIIs increased their long positions in Index Futures as they rolled over closed to 100 per cent of their index long futures while only 56 per cent of their index short futures got rolled over to the next expiry and their long-short ratio stands healthy at around 3.22, according to data from sharekhan.com.

Bank Nifty

The NSE's banking index Bank Nifty closed at 34,803.60 points, a net fall of 1,038 points or 2.9 per cent from 35,841.60points. Bank Nifty March month rollover is at 77.76 per cent versus 74.55 per cent.

Bank Nifty saw a spectacular run up of 20 per cent on an expiry to expiry basis and touched lifetime high at 37,708 level. The Open Interest declined by 21 per cent and it indicates short covering in the index.

Rollover in Bank Nifty was 77.76 per cent as against the three-month average of 77.34 per cent with a huge rollover cost of 171 points, indicating long rollover in the next series.