F&O data denotes consolidation phase

With highest Call Open Interest (OI) adding at 11,600 level, the NSE broad-based index Nifty is expected to move in a consolidation phase with stock-specific moves in the week ahead (July 15-19). On other hand, Put contracts are distributed in the range of 11,400-11,600 strikes. Selling pressure is more likely under 11,600 strike. Lower VIX is further supporting the consolidation phase, observe derivatives analysts.

Indicating possible resistance level, 11,600 strike, which has maximum OI addition, has highest Call OI of 18.22 lakh contracts followed by 11,700 strike and 11,650 strike. Coming to the Put side, 11,500 strike has highest OI of 12.07 lakh contracts followed by 11,400 strikes and 11,550 strikes, while highest OI addition is seen at 11,400 strikes.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "In recent sideways movement Call writers and Put writers were seen active in both Calls and Puts. Derivative data indicates bearish scenario to continue. In the July option contracts, we are seeing maximum options Open Interest building up in 11,500 Puts and 11,800 Calls. In option data, we have been seeing shifting of the range towards the lower band. Market undertone is likely to remain bearish."

Considering the F&O data, Nifty is in consolidating at its demand line, which is on upward journey from 10,841 points level in December 2018, observe the analysts.

And the major Call base is seen at 11,600 and it's expected to act as an immediate hurdle. It also signals towards the aggressive Call writing pattern in the market, which should restrict upsides in coming sessions. The Put base is placed at 11,300, below which selling pressure may intensify. Stock-specific volatility is expected in the week ahead as the market has entered the earnings season.

India VIX eased by 4.49 per cent to 11.91 level and this lower VIX is further pointing to consolidation in the near term. "The Implied Volatility of Calls closed at 12.79 per cent, while that for Put options closed at 12.05 per cent. The Nifty VIX for the week closed at 12.47 per cent and is expected to remain sideways. PCR OI for the week closed at 0.90, which indicates OTM call writing," adds Bisht.

According to data at ICICI Direct.com, the volatility remained subdued, as it eased for the second consecutive week, below 15 per cent, which is expected to keep the index within a range.

For the week ended July 12, 2019, BSE Sensex closed at 38,736.23 points, a net drop of 777.16 points or 1.96 per cent, as against 39,513.39 points. Indicating a fall of 258.65 points or 2.18 per cent, NSE Nifty closed at 11,552.50 points from 11,811.15 points.

"On the technical front, 11,500-11,550 spot level is support zone and current trend is likely to continue towards 11,400-11,450 levels. Nifty is trading between support and resistance. Nifty has multiple resistances at higher levels. Various resistances are 11,700 & 11,800 spot levels. We will see short buildup and long liquidation on every rise," forecasts Bistht.

With a loss of 0.31 per cent, Nifty futures closed at 11,546 points. Moreover, the Nifty futures premium has converted into a discount, from 10 to negative 6, which means liquidation of long positions as the Nifty futures OI has declined by 1.2 million shares since the start of the current series. This scenario may further result in continuation of the profit booking trend in the market. Hence, it may take some time for the banking index to start getting the momentum back. FII outflows are seen in the recent period.

Bank Nifty

During the previous week, Bank Nifty shed 874.35 points, or 2.77 per cent, and closed at 30,601.45 points from 31,475.80 points. Though forming higher highs for three sessions, Bank Nifty failed to hold 30,800-30,850 level.