Trading range narrowing down amid volatility

The futures and options (F&O) data on NSE points to narrowing down of the trading range for the week ahead as the resistance level eased by 700 points to 15,800CE and support level moved up by 1,000 points to 15,500PE.

Despite high volatility, Call Open Interest remained largely unchanged at 15,500 strike. Last weekly settlement did not diverge much from those levels. For the coming week, similar activities are visible at 15700 Call strike. Hence, a round of covering is expected only if the index closes and sustains above these levels. The Put base is significantly high at 15500 strike, which should act as immediate support, observes ICICIdirect.com.

The 15,800 strike has highest Call OI followed by 16,000/ 16,500/16,200/15,900/ 16,100 strikes, while 16,500/16,200/ 16,050/16,100/ 15,700 strikes recorded reasonable addition of Call OI.

Coming to the Put side, maximum Put OI is seen at 15,500/ 15,600/ 15,400/ 15,300/ 15,000/ 14,700/14,500 strikes. Further, 14,700/ 15,000/ 15,400/ 15,600/ 14,600 strikes witnessed significant build-up of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, the highest Call Open Interest concentration is at 16000 strike whereas on Put side, the highest Open Interest concentration is at 15500 strike, which acted as support on Friday's session. Bank Nifty's highest Call Open Interest concentration is at 34000 strike whereas on Put side, it is at 33000 strike."

On the options front in the June F&O expiry, the deep OTM 14500 strike put option was highest in OI with 38846 contracts followed by 14000 PE with 37090 contracts. While on the Call side, the 16500 CE is highest in terms of OI with 39716 contracts followed by the 17000 CE strike with 39401 contracts, according to sharekhan.com.

"In the week gone by, Nifty and Bank Nifty closed flat. However, on Friday, Bank Nifty outperformed Nifty as a sharp correction was witnessed in Reliance after the government hiked export tax on petrol, diesel and ATF," added Bisht.

For the week ended July 1, 2022, BSE Sensex closed at 52,907.93 points, a recovery of 179.95 points or 0.34 per cent, from the previous week's closing of 52,727.98 points. Registering a heavy loss of 52.80 points or 0.33 per cent, NSE Nifty ended the week at 15,752.05 points from 15,699.25 points a week ago.

Bisht forecasts: "On the technical chart, the oscillators such as RSI and stochastic, have sufficient room for upside movement. We expect the Nifty to inch towards 16,000 level, while 16200-15500 would act as a trading zone for the index."

India VIX eased 2.70 per cent to 21.25 level. "Implied Volatility of Calls closed at 21.37 per cent, while that for Put options, it closed at 22.59. The Nifty VIX for the week closed at 21.84 per cent. PCR of OI for the week closed at 1.28 higher than the previous week," remarked Bisht.

The June series saw the Nifty slide and end the series at 15,778 levels. Series-on-series, the Nifty closed June F&O series with a loss of 2.41 per cent and the Bank Nifty also ended in the negative at 33420 falling sharply by 4.78 per cent.

On the open interest front, the Nifty added 35 per cent and is starting the July series with 127.65 lakhs shares in open interest. On the Rollover front Nifty saw lower rollover of 74.81 per cent from previous 78.85 per cent and three-month average of 79.71 per cent and with a rollover cost of -35.9 points and with addition in Open Interest, it indicates some of the shorts in the Nifty got carried forward.

FIIs net shorts declined considerably last week to just over one lakh contracts. However, net shorts are still on the higher side suggesting limited upsides. On the other hand, net longs in stock futures remained higher indicating stock-specific accumulation. Rollover of positions into July series is likely to increase stock specific volatility towards settlement, said ICICIdirect.com in its report.

Bank Nifty

NSE's banking index closed the week at 33,539.45 points, a major decline of 88 points or 0.26 per cent, from the previous week's closing of 33,627.45 points.

The Bank Nifty on the other hand, saw an addition of 38 per cent in OI with an increase in prices indicating shorts building seen in the index. The Bank Nifty saw a rollover of 87.42 per cent from 85.47 per cent and three-month average of 87.23 per cent with rollover cost of -28.15 points. With a high rollover, the Bank Nifty has seen shorts getting carried forward to the next series.