Options OI signals support levels shifting up

Futures and Options (F&O) data pointing to consolidation at 12,000 strike amid undercurrent positive bias in the derivatives space.

The latest F&O data on NSE after trading hours on last Friday reveals that Open Interest (OI) of Put base is shifting upwards confirming the higher support levels when compared with previous week.

Derivatives analysts suggest investors to follow 'buy on dip' strategy in the current market scenario. The NSE broad-based index has been consolidating around 12,000 strike and is likely gain upward momentum in the coming sessions as Put writers are active at 12,000 strike since the beginning of the series.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "For coming week, we expect that the still there is lot of outstanding position is held with Call writers, and we can witness further short covering. After almost V shape recovery into the prices, technical setup in Nifty also suggest for further upside into prices."

Maximum Call OI of 11.81 lakh contracts is seen at 12,100 strike followed by 12,200 strike with 10.26 lakh contracts and 12,500 strike with 10 lakh contracts.

The 12.200 strike recorded highest addition of Call OI of 4.96 lakh contracts, while 12,100 and 12,400 strike recorded sizable OI addition.

"From derivative front, Call writers at 12,000 strike are seen covering their short positions, while Put writers added significant Open Interest," observes Bisht.

Coming to Put side, the 12,000 strike has highest OI of 21.20 lakh contracts followed by 11,900 strike with 16.23 lakh contracts and 11,800 strike with 13.33 lakh contracts.

Highest Put OI addition of 11.73 lakh contracts is seen at 12,000 strike followed by 12,100 strike.

"Bulls once again made a comeback in Indian markets as Nifty along with Sensex surged sharply higher in the week gone by on the back of strong global cues.

Broadly buying was seen in auto, PSU banks, metal and FMCG counters, which lifted the index towards its record peaks once again," added Bisht.

For the week ended December 13, 2019, BSE Sensex closed at 41,009.71 points, a net gain of 564.56 points or 1.39 per cent, from the previous close of 40,445.15 points.

Easing 165.2 points or 1.38 per cent, NSE Nifty ended the week at 12,086.70 points as against last week's 11,921.50 points.

"From technical front, Indian markets bounced sharply from its support levels of 11,800 and seen heavy long build into the prices.

However, on a higher side 12,150 would be immediate hurdle for Nifty while Bank Nifty has immediate resistance at 32,200 levels above which we can further witness follow up buying coming into a market," forecasts Bisht.

According to data from ICICI Direct.com, the volatility was declining, and this may push the NSE Nifty higher. India VIX eased from 15 per cent to around 13.30 per cent, which is the lowest closing of the volatility index since July.

"The Implied Volatility of Calls closed at 11.74 per cent, while that for Put options closed at 12.25 per cent. The Nifty VIX for the week closed at 13.35 per cent and is expected to remain volatile. PCR OI for the week closed at 1.35," said Bisht.

Bank Nifty

Registering a net addition of 672.7 points or 2.1 per cent for the week, Bank Nifty closed at 32,014.25 points as against 31,341.55 points.

The Bank Nifty underperformed when compared to the Nifty after the RBI's monetary policy. The sizeable Put base of 31,000 with selling was seen in most PSU banks along with Axis Bank, Yes Bank and IndusInd Bank, according to ICICI Direct.com.

The Bank Index moved above 32,000, while the positions shifted to 32,500 and 32,700 strikes. In contrast, Put OI blocks were seen in 31,700 strike of weekly contracts, which will be the key support area for Bank Nifty upsides to continue.

The current price ratio of Bank Nifty/Nifty remained intact near 2.64. We feel that in the current leg of the rally, the Bank Nifty could outperform, which will take the ratio higher and make a new life-time high of 2.68.