Options data holds minor positive bias

Highest Call base is seen at 17,000CE followed by 16,300/ 16,800/ 16,000/ 16,600/ 16,900 strikes. Further, 16,300/ 16,700/ 17,500 strikes recorded moderate addition of Call OI.

Coming to the Put side, 16,000PE has maximum Put OI followed by 15,000/ 16,000/15,500/ 15,900/ 16,200/ 16,100 strikes, while 16,000/ 16,100/16,200/ 15,300/ 15,800/ 16,200 strikes witnessed reasonable to major build-up of Put OI. Support level is up by 1,000 points to 16,000PE, while resistance level remained at 17,000CE for a third consecutive week.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, Put writers held maximum Open Interest of more than 78 lakh shares in 16000PE, while Call writers were seen shifting to higher bands with nominal Open Interest." Options writers remained on the edge in the wake of high volatility as sharp moves took place in both the directions. However, considering monthly settlement, close below 16000 should be considered negative for the remaining week. On the higher side, short covering is expected if the Nifty sustains above 16350 points.

"In the week gone by, bulls made a comeback after three weeks of consecutive losses as Indian markets rebound from its recent lows to end the week on a positive note. Nifty surged nearly three per cent, while Bank Nifty also witnessed gains of more than three per cent over the week, on the back of short covering," adds Bisht. For the week ended May 20, 2022, BSE Sensex closed at 54,326.39 points, a major recovery of 1,532.77 points or 2.90 per cent, from the previous week's closing of 52,793.62 points. Registering a rebound of 484 points or 3.06 per cent, NSE Nifty ended the week at 16,266.15points from 15,782.15 points a week ago.

"However, technical indicators suggest further bounce back in the index. The bias is likely to remain in favour of bulls as far Nifty holds above 16000 level and Bank Nifty above 34000 levels. On the higher side, 35000 for Bank Nifty and 16500 levels for Nifty is likely to act as a strong resistance level for index," forecasts Bisht.

Despite a fall of 5.94 per cent, the volatility index India VIX is at 23.10 level. Volatility index tested 25 level before closing the week near the 23 mark. Considering roll activities, intraday volatility may remain higher. However, with low OI in both the Nifty and Bank Nifty, fresh accumulation in May series should pave the way for further directional movement.

"Implied Volatility (IV) of Calls closed at 22.07 per cent, while that for Put options, it closed at 22.79. The Nifty VIX for the week closed at 24.56 per cent. PCR of OI for the week closed at 0.66 lower than the previous week, which indicates more Call writing than Put writing during the week. Volatility gripped the Indian markets in the week gone by and the same kind of moves is expected in upcoming week as well," remarked Bisht.

According to data from ICICIdirect.com, FIIs short positions declined last week as their net shorts in Index futures also fell to 77,000 contracts from 1.25 lakh contracts along with increased long positions in stock futures segment. Hence, continuance of up move is likely towards 16800 if the Nifty sustains above 16350 points.

However, some short covering was experienced in the F&O space. During the week they closed their shorts worth over Rs4,000crore index futures. Also in stock futures, they have increased their net longs and bought over Rs5,500crore.

Bank Nifty

NSE's banking index closed the week at 34,276.40 points, a recovery of 1,155.05 points or 3.48 per cent, from the previous week's closing of 33,121.35 points.

As markets enter the expiry week of May derivatives series, volatility would continue to remain higher and investors may prefer stock -specific action. As per ICICIdirect.com data, stocks where shorts were added after their quarterly number like Axis Bank are likely to witness covering as for the June expiry most of the near ATM strikes saw closure in Call writing positions.

The Bank Nifty, in particular, has witnessed a good amount of Call closure in the last session. If the momentum has to continue, the Bank Nifty should not violate its recent low of 33200, which remains a strong trading bet on downsides. Bank Nifty may test its sizable Call base of 35,000 soon.