F&O data holds wide-range consolidation

More than derivatives data and technicals, the announcement of second tranche of stimulus package by the Centre will influence the domestic bourses more in the week ahead.

If no announcement was made, then the market is more likely to move in the broader consolidation range of 9,000 and 9,500 strikes. Put-Call ratio of Open Interest (OI) is at 1.13 and indicating Put unwinding. The marginal Put OI buildup at immediate strikes is further pointing to weaker supports for the Nifty, observe derivatives analysts.

However, from the options front, the 9,000 Put has maximum OI. This should act as strong support on the downsides, while the 9,500 strike may act as a strong resistance level for NSE Nifty.

The 9,500 strike, which has highest Call OI buildup of 5.35 lakh contracts, has highest Call OI of 22.59 lakh contracts followed by 10,000 strike with 21.94 lakh contracts, 9,000 strike with 14.70 lakh contracts, 9,800 strike with 11.95 lakh contracts and 9,300 strike with 11.92 lakh contracts.

Subsequent highest Call OI buildup was seen at 9,400 strike with 4.90 lakh contracts and 9,300 strike with 4.55 lakh contracts.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "In coming week, the 9,000 level should act as a crucial support for the market and if market slides below this level then the next highest concentration is on Put side is placed at 8,500 with more than 24 lakh shares.

It is expected that market will consolidate at current levels in broader range of 9,200 to 8,700. Traders should remain more focus on stock-specific moves as ongoing result season could keep markets volatile."

The 9,000 strike has 29.77 lakh contracts followed by 8,000 strike with 24.61 lakh contracts, 8,500 strike 20.62 lakh contracts and 7,500 strike with 17.01 lakh contracts. Highest Put OI buildup of 19 lakh contracts was seen at 8,900 strike.

Put OI unwinding of 4.18 lakh contracts was recorded at 9,000 strike followed by 9,300 strike with 2.88 lakh contracts.

"From the derivatives front, Put writers were most active at 9,000 strike with highest concentration of more than 30 lakh while on the other hand, the 9,500 strike holds the highest Open Interest in Calls for the current expiry with more than 22 lakh shares," observes Bisht.

The domestic bourses witnessed short covering rally for the second consecutive session in a row amid rising expectations of a second stimulus package from the government and fell in the last session. Sectorally, the action was seen in NBFC, technology and telecom stocks whereas profit booking witnessed in cement and FMCG stocks.

"After a dip, Nifty bounced back and closed with minor losses in the week gone by. The recovery is led by Reliance whereas on higher level market witnessed distribution in heavy weights. On sectoral front, pharma and power showed strength whereas selling pressure was seen in other sectors," added Bisht.

For the week ended April 24, 2020, BSE Sensex closed at 31,327.22 points, a net loss of 261.50 points or 0.82 per cent, from the previous close of 31,588.72 points. Similarly, NSE Nifty too declined by 112.35 points or 1.21 percent, and closed the week at 9,154.40 points as against last week's at 9,266.75 points.

India VIX considerably declined from level of 83 to the current range of 40. "The Implied Volatility of Calls closed at 34.57 per cent, while that for Put options closed at 37.48 per cent.

The Nifty VIX for the week closed at 39.12 per cent and is expected to remain volatile. PCR OI for the week closed at 1.13 down as compared to last week at 1.34, which indicates Put unwinding," said Bisht.

According to ICICI Direct.com, FIIs sold Rs115 crore, while DIIs bought Rs338 crore in the cash segment. FIIs bought index futures worth Rs139 crore, while in index options they bought Rs1,212 crore.

In the stock futures segment, they sold Rs98 crore. Nifty futures are expected to trade between 9,000 and 9,400 levels amid high volatility.

Bank Nifty

Suffering a hefty loss of 1,094.8 points or 5.29 per cent for the week, Bank Nifty closed at 19,586.65 points as against 20,681.45 points. On Thursday, the Bank Nifty relatively outperformed the Nifty.

Bank Nifty rose almost three per cent led by gains in Kotak Mahindra Bank, HDFC Bank and Federal Bank.

ICICI Direct.com data holds that from the option space, 19,000 and 19,500 Put strikes recorded fresh additions. These levels should act as strong support on the downsides. Bank Nifty may move in the range of 19,800-19,900 and likely to touch 20,150-20,400 levels.