Options data points to range-bound trading

As per the latest options data on NSE, resistance level moved by 200 points to 17,800CE and support level further eased by 1,000 points to 16,500PE. ICICIdirect.com data reveals that NSE Nifty holds highest Put concentration at ATM 17400 strike, while Call option concentration is at 17500 strike for the coming weekly settlement indicating expectations of range bound movement. However, unlike last time, options concentration is equally distributed among both Call and Put strikes. Nifty may consolidate for some time with immediate support at 17200 level.

The highest Call OI base is seen at 18,000CE followed by 17,600/17,500/17,400/ 17,900 strikes. Further, 17,400/17,500/ 17,700/ 17,900/18,200/18,000 strikes recorded reasonable addition of Call OI.

Coming to the Put side, 16,500 strike recorded maximum Put OI followed by 17,000/ 17,1000/ 17,300/16,300/ 16,000 strikes. Other strikes 17,100/ 17,000/16,300/16,000/ 16,200 strikes witnessed moderate to major build-up of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, both Call & Put writers were seen active at 17400 strike."

The low OI seen in February derivatives series continued. During the week, further closure in OI was observed. The current Nifty OI for February series is just near 90 lakh shares. Meanwhile, FIIs turned net longs in index as they created fresh longs last week, according to ICICIdirect.com.

"Indian markets witnessed volatile moves last week in absence of any clear trend. Nifty index ended the week above 17,300 mark," said Bisht.

For the week ended February 11, 2022, BSE Sensex closed at 58,152.92 points, a further net loss of 431.90 points or 0.82 per cent, from the previous week's closing of 58,644.82 points. Registering a drop of 141.55 points or 0.81 per cent, NSE Nifty ended the week at 17,374.75 points from 17,516.30 points a week ago.

Bisht forecasts: "From technical front, Nifty is hovering around its 100-day Exponential Moving Average on daily charts which is placed at 17,370 level. The secondary oscillators suggest that mixed moves in the index are likely to continue in upcoming sessions as well. However, traders can expect some volatility in upcoming sessions as well. For Nifty, the 17200-17100 zone would act as strong support, while the 17550-17650 zone could cap any sharp upside."

India VIX moved up 5.48 per cent to 18.68 level. Despite high intraday volatility and sharp swings, volatility on Friday declined marginally on a weekly basis. It closed the week below 19. Volatility will remain elevated in coming weeks and negative bias should be formed only if the Nifty sustains below 17200 points.

"The Nifty VIX for the week closed at 17.71 per cent. PCR of OI for the week closed at 1.36. Implied Volatility of Calls closed at 16.35 per cent, while that for Put options closed at 17.59," said Bisht.

Foreign institutional investors (FIIs) continued to offload equities to the tune of Rs5,641.81crore, and domestic institutional investors (DIIs) bought equities worth Rs3,562.19 crore. In February so far, FIIs sold equities worth Rs9,712.60crore, while DIIs sold equities worth Rs5,837.25 crore.

Bank Nifty

NSE's banking index closed the week at 38,517.25 points, a net recovery of 272.10 points or 0.70 per cent, from the previous week's closing of 38,789.35 points.

"Bank Nifty managed to close above 38,500 level. Bank Nifty has major support at 38100 & 37800 levels. However, for further upside the index needs to give a break above 39200 level to regain its bullish momentum," observed Bisht.

A few private banks witnessed closure in Call OI positions whereas marginal closure was also there in February futures. It's pointing towards short covering. On the option front, huge Put writing blocks are open in 38000 and 37500 strikes, which remain the support zone. Major support for the index is at 37500 level, which is the key pivotal level for upsides to continue.

Bank Nifty-Nifty price ratio remained near 2.22 level last week. Bank Nifty may trade in a broader range with support pegged at 37500 level. However, before any major outperformance in the banking space, the ratio would consolidate near 2.22 level as the index is likely to follow the Nifty path.