Options data points to wide-range consolidation

The options data from NSE holds further wider trading range for the week ahead as the resistance level remains at 16,000CE for a consecutive second week, while support level moved lower by 1,000 points to 14,000PE. Further, scattered build-up of Open Interest (OI) at strikes with wider gaps indicating lack of direction in the market, observe derivatives analysts. The 16,000CE, which also recorded maximum addition of Call OI, has highest Call OI followed by 15,300/ 16,500/ 15,600/15,200 strikes. Further, 15,300/16,500/15,200 strikes witnessed reasonable build-up of Call OI. Coming to the Put side, the 15,000 strike has the highest Put OI followed by 14,500/ 14,000 strikes.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, once again Call writers are seen adding hefty Open Interest at 15,300 strike, which should act as a strong hurdle for Nifty moving forward. On the downside, 14,800 to 14,700 zone would act as strong support."

Last Friday's session witnessed significant Call writing at Out of The Money (OTM) 15,200 strike as the NSE Nifty suffered selling pressure. The ongoing consolidation phase may continue next week, and 14,900 is likely to act as immediate support for the index. Below which, extended selling pressure is expected ahead of closure of the financial year (2020-21).

"From last few sessions, we have been witnessing a tug of war among bulls and bears, which is keeping Nifty in a broader range of 14,900 to 15,300 with some volatility on cards. However, Nifty indices managed to close above 15,000 levels last week, after losing some ground in Friday's session. Traders were seen booking profits at higher levels, as the rising number of Covid cases in Maharashtra kept bulls on the back foot," adds Bisht.

For the week ended March 12, 2021, BSE Sensex closed at 50,792.08 points, a net gain of 386.76 points. NSE Nifty gained 92.84 points or 0.62 per cent and closed at 15,030.95 points.

Bisht forecasts: "Though, technical setup suggests that the market is still likely to face a consolidation mode in upcoming sessions with Nifty likely to hover within a broader range of 14,800-15,300 levels with some volatile moves. However traders should keep stock-specific action on radar with bias likely to remain in favour of bulls as far Nifty is holding above 14,700 level." The volatility index India VIX declined by 15 per cent 21.70 level. The VIX remained under pressure and moved near 20 last week before rising once again on March 12. If VIX moves above 23 level, it may result in further selling on the bourses.

"The Implied Volatility of Calls closed at 19.21 per cent, while that for Put options closed at 22.19 per cent. The Nifty VIX for the week closed at 20.75 per cent. Put-Call Ratio of OI for the week closed at 1.51 and it indicates more Put writing than Calls," remarked Bisht.

According to data from ICICI Direct.com, FII activity was marginally sluggish in the F&O space. FIIs were net buyers in the index futures segment worth Rs 1,032crore and also bought index options worth Rs 9,920 crore, while selling to the tune of Rs1,704 crore in the stock futures segment during the week.

Bank Nifty

The NSE's banking index Bank Nifty closed at 35,496.65 points, a net gain of 268.50 points or 0.76 per cent from 35,228.15 points.

According to ICICI Direct.com, the Bank Nifty began last week with a major Put OI base at 35,000 strike, which has been acting as important support for the index in the last few weeks. A move below these levels may trigger extended selling pressure towards 33,500 in the banking space. Fresh positive bias in the banking index should be formed above 36,500 level.

The current price ratio of Bank Nifty-Nifty remained near 2.36 level as no major triggers were seen in the index. However, outperformance is expected above 36,500 strike, which would push the ratio higher towards 2.39 levels again. Analysts forecast positive bias for Bank Nifty for the week ahead.

Volatility index recorded a new low for 2021 so far on a closing basis as IV moved towards 20 level. Analysts predict that drop in IVs and rupee appreciation may create some positive sentiment, which may push the index higher.

F&O Trading