Options data points to easing euphoria on bourses

The profit booking pulled down indices lower during the last week, while Call writers took heavy positions amid moderate OI build-up at Put strikes. The options data on NSE indicates declining bullish bias as correction was taking place after key indices hit the all-time high levels, observe derivatives analysts. The resistance level declined by 1,000 points to 18,000PE and support level also eased by 500 points to 17,000PE. The market is losing steam as support and resistance levels eased. Further, the Call-Put gap also narrowed down.

The 18,000 strike has the highest Call OI followed by 19,000/18,200/18,700/18,300/17,800 strikes. Further, 18,000/ 18,700/ 18,500/17,800 strikes recorded heavy build-up of Call OI.

Coming to Put side, maximum Put OI is seen at 17,000 strike followed by 17,500/ 16,500/ 17,700/17,600 strikes. Reasonable addition of Put OI is at 17,000/ 17,500/ 16,600/16,500 strikes.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers added hefty Open Interest at 18,000 strike, while Put writers added marginal Open Interest at 17,500 strike."

For the week ended October 29, 2021, BSE Sensex closed at 59,306.93 points, a net loss of 1,514.69 points or 2.49 per cent, from the previous week's closing of 60,821.62 points. Registering a decline of 443.25 points or 2.44 per cent, NSE Nifty ended the week at 17,671.65 points from 18,114.90 points a week ago.

Bisht forecasts: "Nifty and Bank Nifty dragged sharply on local bourses as Nifty slipped below 17,700 mark. Considering the sharp correction seen during last week, we expect the market to remain under pressure in the coming week as well. On the downside, 17500 would act as immediate support for Nifty, while 17800-17900 zone could limit any sharp upside. Technically Nifty has slipped down below its 20-day exponential moving average on daily charts and tested its 50-day DEMA as well which is placed around 17600 levels."

The October derivatives series showed a mixed pattern of trading as the first half witnessed sharp run-up, with both the NSE Nifty and Bank Nifty making a new high at 18,604 points and 41,829 points, respectively. But the profit booking amid negative global cues eroded the gains in the last few trading sessions.

On Series-on-series, the NSE Nifty closed October F&O series with a marginal gain of 1.50 per cent and Bank Nifty outperformed with an encouraging gain of six per cent. On the Open Interest front, the Nifty saw a reduction of four per cent indicating short covering in the index.

On the Rollover front, Nifty recorded a high rollover of 82.31 per cent as against the three-month average of 80.42 per cent and previous rollover of 74.98 per cent.

The rollover cost of 56 points signifies the majority of the position carried forward is on the longer side.

"Indian markets began the November series with a negative impression as traders were seen booking profits at higher levels," adds Bisht.

Volatility index tested its monthly highs near 18.5 per cent. India VIX declined 2.72 per cent to 17.43 level. "Implied Volatility (IV) of Calls closed at 16.61 per cent, while that for Put options closed at 16.22 per cent. The Nifty VIX for the week closed at 17.91 per cent and is expected to remain volatile. PCR of OI for the week closed at 1.21," remarked Bisht.

In the F&O space, FII activity was concentrated on the index futures segment. With the Nifty witnessing some profit booking, FIIs closed their long positions. They remained net sellers in index futures worth Rs 5,440 crore and sold to the tune of Rs3,902crore in stock futures suggesting stock-specific approach. At the same time, FIIs bought index options worth Rs423 crore.

Bank Nifty

NSE's banking index closed the week at 39,115.60 points, a net recovery of 1,208.05 points or 2.99 per cent, from the previous week's closing of 40,323.65 points. "Bank Nifty also ended the week with a loss of more than 2.5 per cent," said Bisht.

Bank Nifty rollover was at 80.37 per cent from previous 83.47 per cent and three-month average of 80.98% with a rollover cost of 187 points. he Bank Nifty on the other hand also saw a reduction of nine per cent in OI with increase in price indicating short covering in the index.