Upward bias in sight as Put writers turn aggressive

With highest Put base hovering at the 18000 strike, significant positions shifted to ATM 18200 and 18300 strikes. Nifty may gradually move towards 18600 level. The resistance level remained at 19,000CE for the second consecutive week, while the support level moved up by 300 points to 18,000PE as per the latest options data on NSE.

The 19,000CE has highest Call OI followed by 18,500/18,300/ 18,800/ 18,700/ 18,600/19,500 strikes, while 18,900/19,100/ 18,600 recorded reasonable addition of Call OI.

Coming to the Put side, maximum Put OI is seen at 18,000 followed by 18,300/ 18,200/ 18,100/17,800/17,600/16,500/17,000 strikes. Further, 18,300/ 18,200/ 18,350/ 18,400/17,900/ 16,500 strikes recorded signficant to moderate build-up of Put OI.

Derivatives analysts hold that positive bias to remain intact with the Nifty heading towards a fresh high in coming sessions. The index Futures OI remained on the relatively lower side with just 1.25 million shares after the recent additions. On the other hand, the high premium in the Nifty also moderated marginally. This scenario is indicating ongoing positive bias in the market. Despite possible limited declines in the Nifty, every drop can be used to create fresh longs.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "In Nifty, highest Call Open Interest outstanding is at 19000 level followed by 18500 level whereas Put Open Interest is at 18000 level followed by 18300 level. Put writers are more active than Call writers in Friday's session after the gap-up opening."

"Nifty is also trading near an all-time high. Metal, banking and IT sectors were strong whereas selling was seen in pharma stocks," added Bisht.

BSE Sensex closed the week ended November 11, 2022, at 61,795.04 points, a gain of 844.68 points or 1.38 per cent, from the previous week's closing of 60,950.36 points. NSE Nifty ended the week at 18,349.70 points, recovered by 232.55 points or 1.28 per cent, from 18,117.15 points a week ago.

Bisht forecasts: "From the technical front, both the indices are trading above its moving averages and there is still a space for upward movement as suggested by the oscillators. We expect the market to continue its momentum towards the upside and any fall in the market should be considered as a buying opportunity. NIfty support is placed around 18200-18000 level whereas on the upside, 18500 will act as resistance and beyond this level, we can see further upward movement."

India VIX fell 7.47 per cent to 14.40 level. Considering the sharp decline in IVs, stability can be expected and downsides should be restricted. "Implied Volatility of Calls closed at 14.21 per cent, while that for Put options closed at 15.38 per cent. The Nifty VIX for the week closed at 15.57 per cent. PCR of OI for the week closed at 1.24," said Bisht.

Bank Nifty has been facing a hurdle for the past few weeks. The banking index was largely consolidated due to aggressive Call writing positions in 41500 and 42000 strike Calls. As the index moved above 42000 level, Put writing positions moved higher. During the week, any retracement towards 41500 may remain a good buying opportunity, according to ICICIdirect.com.

On the F&O front, ahead of inflation numbers, FIIs reduced their long bets in Index Futures as they sold almost Rs1,500 crore last week. However, FIIs remained net long with exposure of almost 12,000 contracts in the index segment. The same was observed in stock Futures as well where their net longs declined marginally to 1.25 lakh contracts for the November series. In the Options segment, FII activity was significantly higher and they bought nearly Rs17,000 crore in the segment.

Bank Nifty

NSE's banking index closed the week at 42,137.05 points, a hefty recovery of 1,146.20 points or 2.79 per cent, from the previous week's closing of 40,990.85 points. "Bank Nifty hit an all-time high, fuelled by news of merger between HDFC Bank and HDFC Ltd, which is expected to command a MSCI Weight of 13 per cent up from 5.78 per cent," remarked Bisht.