F&O data denotes moderating bullish tone

Based on the futures and options (F&O) data, the support and resistance levels are likely to be at 11,000 and 10,000 strikes respectively for the week ahead (June 29-July 3).

In the previous week ended June 19, the highest Call OI concentration was at 10,500 level and highest Put OI was seen at 9,000 mark. The options data is indicating the upward move of support and resistance levels in a limited range.

Dhirender Singh Bisht, senior research analyst (derivatives), SMC Global Securities Ltd, said: "From derivatives front, Put writers are now shifting to higher bands, while Call writers are still holding maximum Open Interest at 10,500 strike, which should act as major hurdle for Nifty in coming week.

For coming week, we expect markets to consolidate in range of 10,200 to 10,500 with some stock-specific action. However, the bias is likely to remain bullish and any time a decisive move above 10,500 level in Nifty could add further buying momentum."

Since strong support level is seen at distant level, the derivatives analysts feel limited upside movement more likely this week.

Nifty rollover to July derivatives series was 71.6 per cent, lower than previous month's 75.7 per cent and marginally higher than the three-month average of 70 per cent, while the overall market-wide rollover was 92 per cent.

"On July expiry, the margin increased in many stocks due to a rise in lot size, which will lead to a decrease in the liquidity. To counter this problem, exchanges already decreased the margin in spreads though many traders still decrease their position due to a rise in stop loss and risk," observed Bisht.

Nifty closed the June series at 10,288.9 points on June 25 from 9,580.3 points on May 20. Though overall rollovers were on higher level, the undercurrent caution in the market had limited the roll levels due to short side bias.

Further, dividend expectations also put the rollovers under check, observed the analyst. "The highest rollover seen in AdaniPorts, GodrejCP, HDFC, Bosch Ltd and NestleInd whereas on lowest rollover observed in TCS, Larsen & Toubro, CenturyTex, HDFC Life and Balkrisind.

On the sectorial front, cement, refineries and pharmaceuticals witnessed the highest rollover. On another side, entertainment, automobile and steel recorded lowest rollover," remarked Bisht. The Nifty broadly consolidated above 10,200 for the entire week.

Analysts forecast that this pattern may continue next week also and expect positive consolidation in the index.

The 11,000 strike, which has maximum Call OI buildup of 14.36 lakh contracts, has highest Call OI of 27.21 lakh contracts followed by 10,500 strike, which witnessed OI addition of 12.23 lakh contracts, with 25.43 lakh contracts, 10,400 strike with 15.82 lakh contracts. Indicating brisk activity, 10900/ 10,800/10,700 strikes recorded significant Call OI buildup.

Coming to Put side, the 10,000 strike witnessed highest Put OI buildup of 20.10 lakh contracts followed by 10,300 strike, which has maximum Put OI addition of 7.93 lakh contracts, with 15.84 lakh contracts, 10200 strike with 14.39 lakh contracts.

Further, 10200/10000/ 9800 strikes recorded significant Put OI builup. The highest Put is now placed at the 10,000 strike, which should remain a positional support. The highest Call base for the series is placed at 10,500, which remains an intermediate hurdle. With a rise of over 14 per cent in the last one month, BSE Sensex showed highest closing in the past 14 weeks.

However, the market bellwether is still 11 per cent lower from June 2019 level. Bisht forecasts: "From technical front, the 10,500-10,550 zone would act as a crucial hurdle for Nifty in coming sessions as its 200-day exponential moving average is placed on daily charts."

Volatility index, India VIX, dropped four per cent to 28.50 levels. The volatility index remained sideways at relatively lower levels of 30 per cent in June F&O series. The level may continue to be seen in volatility.

Any sharp surge is not expected, which should limit the major downsides in Nifty. "The Implied Volatility of Calls At The Money closed at 19.48 per cent, while that for Put options closed at 31.71 per cent, which indicates the fear in the market as Put seller are charging high IV.

The rise in the gap between Call and Put IV indicates that market will take a trend," said Bisht.

Nifty July futures are witnessing lower volatility. Short positions at higher levels are pushing discount level of Nifty futures July series to spot index rose to 60 points from 15 points level. In the F&O space, despite the settlement week, activities were relatively muted on the FIIs front.

FIIs sold over Rs1,581 crore in index futures and bought Rs 639 crore in index options. The derivatives space recorded short covering to the tune of Rs1,701 in stock futures segment.

Bank Nifty

Adding 253.95 points or 1.19 per cent for the week, Bank Nifty closed at 21,592.05 points as against 21,338.10 points. After witnessing sharp swings on both sides, the Bank Nifty closed below its monthly high level.

However, after a seventh week expiry, the index managed to close above 21,500, which was last seen in April. Private and public banking stocks moved up.

Axis Bank and Kotak Bank were at sizeable Call base, which may keep the index move in check. However, in the current leg of the Bank Nifty rally, PSU banks remained in focus.

The short OI left uncovered for the July series indicates more upsides. Considering the higher intraday volatility, analysts feel both levels remain important for the Bank Nifty.

Call OI build-up is seen at 23,000 strike, which can be looked as a target in the coming days.