Options data points to rising strength

Demonstrating range-bound trading in a consolidation mode, the options data points to the same levels of resistance and support for a consecutive second week. However, the increase in Open Interest (OI) and high rollover to June F&O series, which points to carry forwards of long positions, is also indicating an undercurrent positive bias in the market.

The 17,000 strike has the highest Call base followed by 16,300/ 16,500/16,400/16,900/ 16,400 strikes. Further, 16,300/ 17,000 /17,200/16,400/16,900 strikes witnessed moderate build-up of Call OI. On the Put side, 16,000 strike recorded maximum Put OI followed by 16,300/ 16,200/ 16,100/ 15,700/15,500/15,100 strikes, while 16,300/ 16,000/ 15,100/15,900/ 15,500 strikes recorded significant to moderate addition of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, both Call & Put writers were seen adding hefty Open Interest at 16,300 strike with Open Interest of nearly 39 lakh shares on both sides."

As per the data from sharekhan.com, in the May expiry, deep OTM 15500 strike put option was the highest in OI with 61,666 contracts followed by 16000 PE with 58921 contracts. While on the Call side, 17000 CE is the highest in terms of OI, with 41711 contracts followed by the 17500 CE strike with 31228 contracts.

"Indian markets rebounded sharply last week, with the banking index taking a lead from front as June F&O series began on a positive note. The sentiments remained in favour of bulls as global markets also saw recovering from its recent lows," adds Bisht.

For the week ended May 27, 2022, BSE Sensex closed at 54,884.66 points, a major recovery of 558.27 points or 1.02 per cent, from the previous week's closing of 54,326.39 points. Registering a rebound of 86.30 points or 0.53 per cent, NSE Nifty ended the week at 16,352.45 points from 16,266.15 points a week ago.

Bisht forecasts: "Technically, Nifty has managed to close above its 20-Day Exponential Moving Average on daily charts, which is a positive sign for markets moving ahead. We expect the Nifty to inch towards 16550 level, while the 16100-16000 zone would act as a strong support for the index."

The May derivatives series recorded a downward movement for NSE Nifty, which expired at 16,169 level, 6.23 per cent net loss on series-on-series. Bank Nifty closed in negative at 35099, a loss of 3.6 per cent . On the Open Interest front, Nifty posted an addition of 38 per cent and began the June series with 127.71 lakh shares in OI, according to sharekhan.com.

Nifty's lower rollover to June F&O series was 78.85 per cent as against previous 78.14 per cent and three-month average of 79.16 per cent with rollover cost of -2.05 points. The OI addition indicates carry forward of some of the longs in Nifty.

Bank Nifty recorded an addition of 48 per cent in Open Interest with increased prices, indicating long building seen in the index. Bank Nifty witnessed rollover of 84.76 per cent from previous 93.26 per cent and three-month average of 84.15 per cent, with rollover cost of 70.9 points.

High rollover of 84.76% is pointing to carry forward of long positions in Bank Nifty to the next series.

Volatility index India VIX fell 5.45 per cent to 21.48 level. "Implied Volatility of Calls closed at 20.66 per cent, while that for Put options closed at 21.87. The Nifty VIX for the week closed at 22.72 per cent. PCR of OI for the week closed at 1.38 lower than the previous week," observes Bisht.

The Put-Call Ratio (PCR) in June series began on a low side at 1.08. On the other hand, the volatility index in this month has been hovering at 22 level. The higher India VIX is a sign of a volatile market, investors are advised to hedge against their long positions.

Bank Nifty

NSE's banking index closed the week at 35,613.30 points, a recovery of 1,336.90 points or 3.90 per cent, from the previous week's closing of 34,276.40 points.

"Banking index witnessed gains more than 3.5% while Nifty also added 0.50% gains during the week," remarked Bisht.