F&O data denotes undercurrent bearish tone

Since futures and options (F&O) data indicating lower side shifting of Open Interest (OI) band in Calls and Puts strikes, the market seems to be in minor consolidation with a bearish bias. The options data also points to lower support level for NSE Nifty at 9,500 strike as against the 9,800 strike in the previous week. Similarly, the resistance level for Nifty too declined to 10,000 strike from the 10,200 level in the last week. The recovery of Nifty in last session was sharp towards 10,000 level and the index may trade within a range after these volatile swings.

For the week ahead, the 9,500-9,600 range is likely to be a major support zone, while on higher side, supply may be seen near 10,200 as more consolidation is possible, forecast derivatives analysts. Dhirender Singh Bisht, senior research analyst (derivatives), SMC Global Securities Ltd, said: "From derivatives front, a tug of war was seen between bulls and bears. On one hand, hefty Put writing was observed at 9,700 strike, while on other hand, Call writers at 10,000 strike added substantial Open Interest,"

The 10,000 strike, which witnessed highest Call OI buildup of 7.38 lakh contracts, recorded highest Call OI of 17.37 lakh contracts, followed by 10,500 strike with 15.78 lakh contracts and 10,300 strike with 13.83 lakh contracts. The Call strikes of 11,000/ 10,300/10,200/ 9,800 recorded significant OI addition. On Put side, 9500 strike has highest OI of 23.01 lakh contracts followed by 9,000 strike with 20.55 lakh, 9400 strike with 15.85 lakh contracts and 9,300 strike with 15.23 lakh contracts. Put strikes 9,500/ 9,400/9,000 each recorded OI buildup of over 10 lakh contracts.

Investors were anticipating that NSE Nifty would surpass 10,000 mark, when it crossed 9,550 level, but the broad-based index couldn't close above the psychological strike. Derivatives analysts forecast consolidation before any major movement on either side.

"Indian markets remained highly volatile during last week. Nifty after slipping back below 9,550 mark, it recovered sharply from its lows and once again reclaimed 9,950 level in single trading session as heavyweights like Reliance, Bajaj twins, M&M supported the markets from lower levels," added Bisht.

For the week ended June 12, 2020, BSE Sensex closed at 33,780.89, a net loss of 506.35 points or 1.47 per cent, from the previous close of 34,287.24 points. Similarly, NSE Nifty too declined by 169.25 points or 1.66 percent, and closed the week at 9,972.90 points as against last week's at 10,142.15 points.

Bisht forecasts: "From technical front, momentum oscillators suggest that volatility is likely to remain in markets in this week as well and on higher side 10,000 would act as psychological hurdle for Nifty. However, on downside 9,800-9,750 zone would act as an immediate support for Nifty."

According to ICICI Direct.com, Indian market's volatility index (VIX) moved up from 29.5 per cent to 31 level. This also saw some cool-off towards 30 per cent. "The Implied Volatility of Calls closed at 29.46 per cent, while that for Put options closed at 31.75 per cent. The Nifty VIX for the week closed at 30.82 per cent and is expected to remain sideways. PCR OI for the week closed at 1.54down as compared to last week at 1.76, which indicates Put unwinding," maintained Bisht.

FPI flows were mostly through block deals, while fresh inflows in secondary markets are still awaited. In the F&O space, FPIs bought Rs1,558 crore in stock futures. Since a major move was experienced in the beaten down space.

Bank Nifty

Shedding 379.55 points or 1.80 per cent for the week, Bank Nifty closed at 20,654.55 points as against 21,034.50 points.

Sharp reversals were seen on the weekly expiry day where Bank Nifty futures added nearly nine per cent of short OI block. Bank Nifty witnessed sharp volatility after Supreme Court deferred hearing on moratorium case for next week. The NSE banking index moved below 20,000 and managed to end above 20,500 last Friday thereby showing intraday volatility of more than 1000 points.

As per the data from ICICI Direct.com, significant Call writing block was seen at 21,000 strike followed by 21,500, which will keep the index move in check. However, the index may move towards its sizeable Put base of 19,500, which will be the target for the coming week, observe analysts. If Bank Nifty moves above 10,200 level, it'll drive any major pullback in banking stocks otherwise they will broadly remained in a range. On the other hand, PSU banking stocks don't have any major weightage in the Bank Nifty and they're expected to start performing again if the index remains rangebound.