Lowering Put base signals bearish mode

The highest Call OI at 12,000 and 11,900 strikes indicate strong resistance to the NSE Nifty in the expiry week ahead for November F&O series.

The highest concentration of Put OI eased from previous week's 11,800 strike to 11,500 strike for week ended November 22, 2019. With Put base moving downwards, the market undertone is bearish, observe derivative analysts.

The 11,500 strike has maximum Put OI base of 19.79 lakh contracts followed by 11,900 strike with 28.16 lakh contracts and 11,800 strike with 25.03 lakh contracts.

Highest Put OI addition of 7.13 lakh contracts is seen at 11,700 strike and 3.9 lakh contracts at 12,000 strike.

The 12,000 strike continues to have maximum OI as Open Interest of 48.72 lakh contracts were at the strike followed by 11,900 strike with 25.33 lakh contracts and 12,100 strike with 25.24 lakh contracts.

The highest Call OI addition of 11.89 lakh contracts was seen at 11,900 strike followed by 12,000 strike.

According to data on ICICI Direct.com, after breaching 11,700 level, the NSE Nifty has been hovering below 12,000 in the current leg.

The highest Call base has remained at 12,000 for a fourth consecutive week and this has led to the consolidation. The short covering leg may be seen as the current F&O series nearing expiry on November 28.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities, said: "At the current juncture, derivatives data suggests that Call writers are adding hefty Open Interest in 11,950 and 12,000 strike, which should act strong hurdle for Nifty moving forward.

However, on downside 11,800 Puts hold with maximum OI build up and act as immediate support."

Despite negative market breadth during the week, the mid-cap index remained resilient, which means the top weighted midcap stocks have started witnessing buying interest.

"The tug of war among bulls and bears once again kept the Indian markets within a range and Nifty managed to hold above 11,900 mark and ended the week near the unchanged line.

Profit booking in heavyweights like HDFC Bank, Reliance, TCS and Infosys capped any sharp gains in index, while on sectoral front, some buying momentum was seen in metal auto and energy counter in later part of the week," added Bisht.

BSE Sensex closed flat at 40,359.41 points, a miniscule loss of 2.72 points, from the previous close of 40,356.69 points.

Easing just 18.95 points or 0.15 per cent, NSE Nifty ended the week at 11,914.40 points as against last week's 11,895.45 points.

Elaborating technical charts, Bisht forecasts: "From technical front, we expect that the consolidation in index is likely to continue in coming sessions as well as secondary oscillators are not suggesting any sharp moves.

We expect Nifty to trade within a broader range of 11,800-12,000 with stock-specific action."

Volatility has again declined. The drop-in volatility indicates towards more active positioning from option writers.

Implied Volatility (IV) contracted from 17.5 per cent and moved towards 15 per cent on the back of writing in OTM strikes.

"The Implied Volatility of Calls closed at 13.17 per cent, while that for Put options closed at 14.10 per cent.

The Nifty VIX for the week closed at 14.98 per cent and is expected to remain volatile. Put-Call ratio if OI for the week closed at 1.22," remarked Bisht.

Bank Nifty

Registering a net gain of 103.2 points or 0.33 per cent for the week, Bank Nifty closed at 31,111.60 points as against 31,008.40 points on Friday November 15.

"Bank nifty also witnessed profit booking in later part of the week and ended well below 31200 mark.

However, as far Bank Nifty is concerned 31,000-30,800 is strong support zone, while on higher side, 31,350 should act as immediate hurdle," said Bisht.

The banking index is in the current leg of consolidation and trading in a positive bias. Bank Nifty remained near 31,100.

Broader indices recorded profit booking, but Bank Nifty futures turned into a discount of 25 points along with closure in OI indicating profit booking at higher levels.

ICICI Direct.com further reveals that the price ratio of Bank Nifty-Nifty remained in a narrow range of 2.58-2.61 for the week indicating more sideways movement in coming days.

Additions are seen in 30, 800 strike Put for the November series, indicating major support.