Further consolidation likely before a fresh up move

Derivatives analysts forecast a favourable market for bulls for the week ahead and a possible consolidation as well. As per the latest options data on NSE, Resistance level of 18,000CE remained unchanged for a second consecutive week, while the support level at 17,000PE remained unchanged for five weeks in a row. The Nifty respected its highest Call base and settled near these levels on weekly expiry. However, unlike the last couple of weeks, Put writing gathered steam, but the Call writing is still relatively higher for the coming weekly settlement suggesting there may be some consolidation before a fresh up move. If Nifty doesn't move below 17500, then the positive bias may continue and the 18300 level is likely to be seen in coming weeks.

The18,000CE has highest Call OI followed by 19,000/17,900/ 18,500/ 18,200/18,700/18,600/ 18,100/17,800 strikes, while 19,000/ 17,00/ 18,000/ 18,500/ 18,700/18,300strikes witnessed hefty build-up of Call OI. Coming to the Put side, maximum Put OI is seen at 17,000 followed by 17,100/ 17,40/ 17,600/ 17,700/ 17,900/16,900/16,800 strikes. The 17,000/17,700/17,600/ 17,200/ 17,100/ 16,900 strikes witnessed heavy to moderate addition of Put OI. Further,16,800/17,500/ 17,550 strikes recorded offloading of Put OI. In the recent consolidation, NSE Nifty recorded a build-up of fresh shorts, while FIIs' net shorts rose to over 80,000 contracts last week. With the Nifty moving beyond 17800, a short covering move is expected and that may take the Nifty towards a target level of 18,300 points, as per ICICIdirect.com.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers were seen adding hefty Open Interest at 17900 &18000 strikes, while Put writers added marginal Open Interest at 17800, 17700 & 17600 strikes. For upcoming week, the 18000 level would act as a key psychological resistance for Nifty, while the 17600-17550 zone is likely to give support on any downside. We expect that bias is likely to remain in favour of bulls and any dip should be used to create fresh longs. However, the stock-specific action is likely to remain on radar as well."

Kush Ghodasara, CMT, an independent market expert, explains: "Last week, we witnessed sharp short covering in 17700-18000CE for 15th September making short positions in market at low. On the downside, we have seen tremendous writing at 17500-17600 Put making support for next week. We shall witness some long trades in market, if we sustain over 17,800 on Monday."

Bisht said: "Indian markets extended its last week's gains and settled in green territory as NSE Nifty surpassed above 17,800 level, while Bank Nifty also managed to end the week with gains of more than 2.5 per cent. Firm global cues along with continuous foreign inflows supported the sentiments for Indian markets."

For the week ended September 9, 2022, BSE Sensex closed at 59,793.14points, a reasonable rebound of 989.81 points or 1.68 per cent, from the previous week's closing of 58,803.33 points. Registering a recovery of 293.85 points or 1.67 percent, NSE Nifty ended the week at 17,833.35 points from 17,539.45 points a week ago.

India VIX declined by 3.21 per cent to 17.72 level. "Implied Volatility of Calls closed at 16.36 per cent, while that for Put options, it closed at 18.16 per cent. The Nifty VIX for the week closed at 18.31 per cent.PCR of OI for the week closed at 1.42," remarked Bisht.

FIIs in the F&O space closed some of the shorts towards the end of the week. While net shorts are still higher, their position declined to 75,000 contracts from 86000 contracts. FIIs' net longs in stock Futures are continuously declining and are at the lowest levels since May as they sold almost Rs7,000crore.

Bank Nifty

NSE's banking index closed the week at 40,415.70 points, again of 994.70 points or 2.52 per cent, from the previous week's closing of 39,421points. Select private banking stocks managed to move above their Call bases. Along with this, Bank Nifty Call positions shifted to 41,000 and41,500 strikes that can be looked at as a target for the coming week. Major Put writing was seen at 39500 strike, and it remains a strong support area for continuation of upsides.