Volatile trading likely ahead of F&O expiry

Indicating wider trading range in the ongoing bull market, the options data, after the last Friday trading hours on NSE, is showing the same resistance level of 18,000CE and support level of 17,000PE when compared with the previous week.

The stock market on last Friday witnessed a sharp reversal happening from a higher level due to which the volatility index moved to three months high and closed above 16 per cent. Analysts opine that volatility may continue to rise further in next sessions ahead of F&O expiry on September 30. As a result, the trading range would increase in indices and sharp moves being expected on both sides.

Highest Call OI base is at 18,500 strike followed by 18,000/ 17,900/ 18,100/ 18,200 strikes. Further strikes 17,900/ 18,000/18,500/ 18,700 witnessed reasonable addition of Call OI. Coming to the Put side, 17,000 strikes has maximum Put OI followed by 17,500/17,300/ 17,200/ 17,700 strikes. Other strikes 17,900/ 17,000/17,800/ 17,850/ 17,700 strikes recorded moderate build-up of Put OI.

Dhirender Singh Bisht, senior research analyst (derivatives) at SMC Global Securities Ltd, said: "From derivatives front, Call writers at 17,600 strike triggered sharp short covering, while Put writers added hefty Open Interest at 17,700 strike. In upcoming days, we expect the market to remain on a volatile path as we are approaching the expiry of the September series contract."

On the F&O data from ICICI Direct.com, the current up move has put Call writers on the block and positions were moved to deep OTM strikes towards 18,000 points. Despite significant writing at ATM and OTM Call strikes on Friday, analysts predict that till major Put bases are not breached, one should remain positive. During the last couple of weeks, Put writers continued to strengthen the base. For the coming weekly settlement, the 17,400 strike holds noteworthy Open Interest.

India VIX moved up 1.93 per cent to 16.92 level. On the volatility front, India VIX moved to its highest level in more than three months and closed above 16 level. While the market remains in an uptrend, such a sharp rise in volatility may induce some profit booking in the coming sessions. Derivatives analysts advise investors to hold long positions above 17,400 levels.

"Indian markets witnessed another week of stunner rally in the week gone by as Nifty scaled to its record highs and closed above 17,800 mark for the first time. Banking, financials, reality and IT stocks supported the big up move in markets," adds Bisht.

For the week ended September 24, 2021, BSE Sensex closed at 60,048.47 points, a rise of 1,032.58 points or 1.74 per cent, from the previous week's closing of 59,015.89 points. Registering a gain of 268.05 points or 1.52 per cent, NSE Nifty ended the week at 17,853.20 points from 17,585.15 points a week ago.

Bisht forecasts: "However bias is likely to remain in favour of bulls and any dip into the prices should be used to create fresh longs. On the higher side, now 18,000 levels would act as a key psychological resistance for Nifty."

"Implied Volatility of Calls closed at 14.78 per cent, while that for Put options closed at 15.20 per cent. The Nifty VIX for the week closed at 16.60 per cent. PCR of OI for the week closed at 1.31," observes Bisht.

In the F&O space, FIIs remained concentrated in the stock futures and index options space. With the Nifty trading at lifetime highs, FIIs are active in stock futures. FIIs were net buyers in index futures worth Rs82 crore and they sold to the tune of Rs2,840crore in stock futures and Rs4,365-cr index options during the week.

Bank Nifty

NSE's banking index closed the week at 37,830.30 points, a marginal gain of 18.35 points or 0.05 per cent, from the previous week's closing of 37,811.95 points. Due to high volatility, the option OI is placed from 36,500 to 38,500 strikes. However, major Put OI writing was observed in 37,000 strike, followed by 37,500, according to ICICI Direct.com.

On the upside, analysts observe that the Bank Nifty may head towards 39,000 as money flow is likely to see from IT and metals to banking. The current price ratio of Bank Nifty-Nifty reverted from its yearly low and it may outperform in banking stocks should continue for a couple more days.