F&O data denotes modest support for Nifty

Drop in volatility coupled with higher Put-Call ratio indicates a possible bounce in the week ahead for the May derivatives series. Short covering and rollovers to May F&O series added to the gains.

The options band is expected to be 9,000-10,200 range. However, F&O data indicates that no strong Call writing seen at immediate strikes of the previous closing, said analysts.

On the options front, At The Money (ATM) strike of Call and Put holds significant Open Interest (OI) and it reveals the trading in the range of 9,500-9,750 levels.

Maximum Call OI of 27.47 lakh contracts was seen at 9,900 strike, which also recorded highest OI addition of 22.82 lakh contracts, followed by 10,000 strike with 25.40 lakh contracts, 9,000 strike with 9.77 lakh contracts and 11,000 strike with 9.95 lakh contracts. Highest Call OI winding up was recorded at 9,500 / 9,600 / 9,700 strikes.

Marginal OI buildup is seen above 9,950 level. This clearly indicates that support level for NSE Nifty is moving up, but in a modest way, observe analysts.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From the derivatives front, the Call writers at 9,500 strike trigger sharp short covering, which is propelling the Nifty to move towards 9,900 levels."

Coming to Put side, highest Put OI of 26.43 lakh contracts recorded at 9,000 strike followed by 9,800 strike, which recorded maximum OI addition of 22.49 lakh contracts, with 23.01 lakh contracts, 9500 strike with 18.43 lakh contracts and 9,850 strike with 18 lakh contracts. Further, 9,700-9,850 zone witnessed reasonable Put OI buildup.

April derivatives series concluded on Thursday as Nifty recorded 14.1 per cent gain, highest since May 2009. Nifty rollover into May derivatives series stood at 60 per cent as against 59 per cent in previous month, while Bank Nifty rollover increased to 67 per cent for May F&O series from 52 per cent for April series.

Overall rollover is at 71.29 per cent, higher than previous 68.69 per cent. But the rollover was with low base of OI and OI declined by 17 per cent on expiry-to-expiry comparison, said analysts.

"Once again bulls made a comeback in Indian markets and Nifty and Bank Nifty both the indices soared high in the week gone by majorly taking cues from firm global markets as positive results for experimental Remdesivir drug for Covid-19 treatment lifted the sentiment," said Bisht.

For the week ended April 30, 2020, (holiday on May 1), BSE Sensex closed at 33,717.62 points, a net gain of 2,390.40 points or 7.63 per cent, from the previous close of 31,327.22 points.

Similarly, NSE Nifty too recovered by 705.5 points or 7.70 percent, and closed the week at 9,859.90 points as against last week's at 9,154.409,266.75 points.

"For coming week, however, now 9,500-9,400 zone would act as a key support for the markets, while 10,000 would act as psychological level for Nifty on higher side.

From the technical front, the secondary oscillators suggest further upside into the prices in coming sessions and traders should use any dip as a buying opportunity," forecasts Bisht.

India VIX continued to ease in the seventh consecutive session and five weeks in a row as it declined by 0.43 per cent to 33.99.

"The Implied Volatility of Calls closed at 29.68 per cent, while Put options closed at 31.43 per cent.

The Nifty VIX for the week closed at 33.99 per cent and is expected to remain volatile. PCR OI for the week closed at 2.09 up as compared to last week at 1.59, which indicates Put writing," maintained Bisht.

According to ICICI Direct.com, stocks that recorded long buildup and short covering included HDFC Ltd, Apollo Tyres, SBI, Infosys, Sail, Hindalco and HDFC Bank.

Select stocks such as Cummins India, HPCL, Nestlé India, Berger Paints, Cipla, Voltas and Hindustan Unilever witnessed short buildup and profit booking.

FPIs bought worth Rs722 crore, while DIIs bought Rs786 crore in the cash segment. FPIs sold index futures worth Rs66 crore and bought Rs423 cr in index options, as per data from ICICI Direct.com.

Bank Nifty

Gaining by 1,947.85 points or 9.94 per cent for the week, Bank Nifty closed at 21,534.50 points as against 19,586.65 points.

"Banking index, however, outperformed the other sectors as hefty short covering was seen from lower levels with HDFC and HDFC Bank remained among top performers in the financial sector," added Bisht.

The Nifty is expected to trade between 9,500 and 9,750 levels amid high volatility in Bank Nifty Futures. In the stock futures segment, FPIs bought worth Rs478 crore.

Banking stocks continued their upward march for a third consecutive session.

The Bank Nifty in the last session rose 1.5 per cent to close above its resistance level of 21,000, led by HDFC Bank while follow-up buying was also witnessed in midcap as well as PSU banks.

After the breakout from the broader trading range of 19,000 and 21,000, analysts hold the view that Bank Nifty may continue towards 21,700.