Options data holds range-bound trading

The resistance level remains at 18,600CE for a second consecutive week and the support level declined by 600 points to 18,000PE as per the data after last Friday's session on NSE. The 18,600CE has highest Call OI followed by 18,400/18,500/ 18,800/ 19,000 strikes, while 18,400 has maximum Call OI addition followed by 18,300/18,600/ 18,700/19,000 strikes.

Coming to the Put side, the large Put OI base is seen at 18,000PE followed by 17,500/18,100/ 18,400/ 18,200. Further, 18,300/ 18,400/ 18,100/ 18,000/ 17,800/ 17,500 strikes recorded reasonable build-up of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers were seen adding hefty Open Interest at 18400, 18500 & 18600 strikes, while marginal Put writing was observed at 18200 & 18000 strikes."

After the US Fed hiked interest rate, it resulted in heavy Call writing at ATM and OTM strikes. While the Put base is at ATM 18300 strike, Call bases are much stronger at 18400 and higher strikes, according to ICICIdirect.com dat. Hence, investors can consider fresh longs if Nifty moves above 18400 level.

"Indian markets tumbled down last week with IT, auto, reality and pharma counters seen sharp sell-off along with Banking index. The selling pressure was seen on the back of global factors as the Federal Reserve raised the benchmark interest rate by 50 basis points" added Bisht.

BSE Sensex closed the week ended December 17, 2022, at 61,337.81 points, a net fall of 843.86 points or 1.35 per cent, from the previous week's closing of 62,181.67 points. NSE Nifty ended the week at 18,269 points, lower by 227.60 points or 1.23 per cent, from 18,496.60 points a week ago.

Bisht forecasts: "Technically Nifty has slipped back below its 20-day exponential moving average on daily charts and expected to trade under pressure in upcoming sessions. On the downside, 18200 levels are likely to provide support to Nifty below which further sell off can be seen in upcoming week. Banking index has strong support at 43000 levels while any upside rally in prices is likely to get capped around the 43600-43800 zone. For upcoming sessions, we keep our stance a bit cautious for Indian markets as we expect further profit booking at higher levels."

However, high premium and low volatility had subsided significantly as Nifty premium has declined from highs of near 130 to just 50 points. FII net longs declined sharply from over one lakh contracts at the inception of the series to just 12,000 contracts due to fresh short build-up. India VIX rose 2.46 per cent to 14.07 level.

On the other hand, the volatility index has also moved towards 14 level providing some comfort. "Implied Volatility (IV) of Calls closed at 12.33 percent, while that for Put options, it closed at 13.38 percent. The Nifty VIX for the week closed at 13.73 percent. PCR of OI for the week closed at 1.13," observed Bisht.

Bank Nifty

NSE's banking index closed the week at 43,219.50 points, a decline of 413.95 points or 0.94 per cent, from the previous week's closing of 43,633.45 points. Despite the recent weakness, we have not seen any short OI build-up in the banking index with marginal closure of positions observed, suggesting profit booking at higher levels. On the options front, significant option writing is visible at 43000 Put and 43500 Call strikes. We expect fresh positive bias to be formed if the Bank Nifty sustains above 43500 levels. The price ratio of Bank Nifty-Nifty moved marginally higher to 2.36 level last week. Analysts forecast that outperformance from the banking space should continue and the price ratio should head towards 2.40 in coming week.