Volatile trading ahead of Feb F&O expiry

As per the latest options data, NSE Nifty holds the highest options base at 17,000 Put and 17500 strike Call. Despite all the global uncertainty, Nifty largely remained to close above 17,200 points. Derivatives analysts expect the NSE Nifty to move towards 17,600 during February F&O series settlement. India VIX is still hovering above 22 and indicating volatile sessions ahead. The Open Interest (OI) increased sharply as participation was higher than usual due to higher volatility. Nifty OI rose by 10 lakh shares to 1.05 crore shares as on last Friday. FIIs also turned net longs in both these segments. Analysts expect that the index is entering the settlement week with a positive bias.

NSE data reveals that the resistance moved up by 200 points to 18,000CE and support level declined by 400 points to 17,000PE.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "Nifty indices faced pressure around 17500 level as Call writers were aggressive on this strike whereas Put writers were aggressive around 17000 level."

The 18,000CE has the highest Call base followed by 17,500/ 18,500/17,700/18,200 strikes. Further, strikes 18,000/17,800/17,00/ 17,700 strikes witnessed reasonable addition of Call OI.

Coming to the Put side, 17,000PE strike recorded maximum Put OI followed by 16,500/ 16,200/17,00/16,800/16,700 strikes. The 16,800/ 17,000/ 17,300/16,400 strikes witnessed moderate build-up of Put OI.

"In the week gone by, continued news flow of Ukraine and Russia tension created a volatility as well as uncertainty in the market. Selling pressure was seen on every bounce in the index," added Bisht.

For the week ended February 18, 2022, BSE Sensex closed at 57,832.97 points, a further net loss of 59.04 points or 0.10 per cent, from the previous week's closing of 58,644.82 points. Registering a drop of 98.45 points or 0.56 per cent, NSE Nifty ended the week at 17,276.30 points from 17,374.75 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 17350 levels. On the daily chart, the Nifty is forming a descending triangle and breakout in any direction can trigger a good momentum in the Nifty till then we can expect a range bound volatile market. For Nifty, 17200-17100 zone would act as strong support, while the 17550-17650 zone could cap any sharp upside."

Volatility index India VIX edged up 0.73 per cent to 22.16 level. Wild swings caused volatility to inch up above 22 level last week as broader markets underperformed. However, India VIX reverted from 24 level thrice in the last four months. Analysts predict that the volatility index may move further higher. Hence, a consolidation is more likely in the markets.

"Implied Volatility of Calls closed at 20.02 per cent, while that for Put options closed at 21.57. The Nifty VIX for the week closed at 22.01 per cent, which was higher than the previous week. Rise in VIX created a caution in the market and any breakdown from heron may be forceful. PCR of OI for the week closed at 0.87 indicating Call writers are more aggressive than Put writers," observed Bisht.

Bank Nifty

NSE's banking index closed the week at 37,599.15 points, a decline of 918.10 points or 2.38 per cent, from the previous week's closing of 38,517.25 points.

"On weekly basis, Bank Nifty was weaker than Nifty as Bank Nifty shed more than two per cent. Bank Nifty has major supports at 36300 & 36700 levels," remarked Bisht.

According to ICICIdirect.com, Bank Nifty saw 14 per cent fresh short additions. During the week, no major closures were observed in these short positions. Closures in the short positions are expected only above 38200 level.

Major Call OI base for the index is placed at 38000 strike followed by 38500. Unless the index manages to close above 38200 levels, the weakness in the indices should continue.

Major recovery is expected only if there would be any positive trigger on the geopolitical front. Until then, the index is expected to remain under pressure and head towards 37000 level.