F&O data holds wide range trading amid volatility

Since the highest addition of Put Open Interest (OI) at 11,000 strike, a level seen before the corporate tax cut announcement, a higher base near 11,200 strike is forming for NSE Nifty.

The market broad-based index recovered from the crucial support range of 11,100-11,200 and may consolidate above these levels. Any positive global cues may induce short covering, thus propelling the key indices higher, observe derivatives analysts.

The 11,400 strike has maximum Call OI of 14.68 lakh contracts followed by 11,500 strike with 14.27 lakh contracts and 11,300 strike with 11.96 lakh contracts. Highest Call OI addition is seen at 11,400 strike with 6.75 lakh contracts and 11,500 strike with 5.18 lakh contracts.

Coming to Put side, 11,000 strike, which has highest OI addition of 5.13 lakh contracts, has maximum OI of 11.85 lakh contracts followed by 11,200 strike with OI of 11.10 lakh contracts and OI addition of five lakh contracts. Further Put OI addition is seen at 11,200 and 11,300 strikes.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Indian markets witnessed a roller coaster ride in the week gone by as volatility grip the market on back of mixed global cues and earning season.

However, with gains of nearly one per cent on weekly basis both Nifty and Bank Nifty ended the week in positive territory. From derivative front as well the tug of war was seen among bulls and bears as both Call and Put writers were seen actively shifting their positions."

BSE Sensex closed the week ended October 11, 2019, at 38,127.08 points, a net gain of 453.77 points or 1.20 per cent, as against the previous week's close of 37,673.31 points.

Registering a weekly rise of 130.3 points or 1.16 per cent, NSE Nifty ended at 11,305.05 points from 11,174.75 points.

Bisht forecasts that "for coming week we expect that nifty need to take a decisive move above 11,450 for any further upside in coming sessions.

However, on downside 11,150-11,100 will act as major support and as far we are holding above that the bias is likely to remain bullish."

The volatility index is hovering at 18 per cent. If the volatility eases, the key indices may move higher. Volatility remained high as Nifty and Bank Nifty fell sharply and moved towards their sizeable Put base of 11,200 and 28,000 respectively.

The implied volatility (IV) rose from 15 per cent towards six-month hurdle of 18 per cent.

"For coming week we believe that volatility will likely to grip the market once again as the trade talks between the US and China will also remain on the participants' radar.

The Implied Volatility (IV) of Calls was up and closed at 16.40 per cent, while that for put options closed at 17.55%. The Nifty VIX for the week closed at 17.23 per cent and is expected to remain volatile. Put-Call ratio of OI for the week closed at 0.93," observes Bisht.

The data from ICICI Direct.com reveals that the premium of Nifty futures fell to 20 points from 70 points at the beginning of October F&O series. The lower premiums may provide some upward momentum as historically it is seen that the Nifty finds it difficult to move at higher premiums.

Bank Nifty

Adding 310.65 points or 1.12 per cent, Bank Nifty ended the week at 28,042.50 points, as against the previous week's close of 27,731.85 points.

The latest 25 bps rate cut by the Reserve Bank of India (RBI) failed to infuse fresh buying interest in the banking stocks. Hence, the Bank Nifty corrected sharply and underperformed.

According to ICICI Direct.com, the buying interest was seen in most heavyweights like Axis Bank and HDFC Bank near 28,000. Put OI blocks are also seen in out of the money (OTM) strikes of private banks, which will provide a cushion in coming days, at 28,500 to 27,500 strikes whereas no sizeable additions are seen in Call options.

The highest addition is seen in 28,000 strike Put, which can act as a good support area for the short-term.