Trading Range Narrows Amid Volatility
Futures and options (F&O) data on NSE points to a narrowing trading range for the week ahead, with the resistance level lowering 700 points at 15,800 CE and the support level rising 700 points. 1,000 points at 15,500 EP.
Despite high volatility, open interest on calls remained largely unchanged at 15,500 strikes. The latest weekly settlement did not diverge much from these levels. For the coming week, similar activity is visible at 15700 Call strike. Therefore, a hedging cycle is only expected if the index closes and holds above these levels. The Put basis is significantly high at 15500 strikes, which should serve as immediate support, observes ICICIdirect.com.
The 15,800 strike has the highest call OI followed by 16,000/16,500/16,200/15,900/16,100 strikes, while 16,500/16,200/16,050/16,100/15,700 strikes recorded a reasonable addition of Call OI.
On the Put side, the maximum Put OI is seen at 15,500/ 15,600/ 15,400/ 15,300/ 15,000/ 14,700/14,500 strikes. Additionally, 14,700/ 15,000/ 15,400/ 15,600/ 14,600 strikes witnessed a significant accumulation of Put OI.
Dhirender Singh Bisht, Senior Research Analyst (Derivatives) at SMC Global Securities Ltd, said: “On the derivatives side, the highest concentration of open interests is at 16,000 strikes while on the puts side, the concentration of Highest open interest is at 15,500 strikes, which acted as support in Friday’s session. The highest concentration of open interest on Bank Nifty calls is at 34,000 strikes while on the Put side it is at 33,000 strikes.
On the options front at the June F&O expiry, the OTM deep put 14500 strike was the highest in OI with 38846 contracts followed by 14000 PE with 37090 contracts. While on the call side, the 16500 CE is the highest in terms of OI with 39716 contracts followed by the 17000 CE strike with 39401 contracts, according to sharekhan.com.
“Over the past week, Nifty and Bank Nifty closed flat. However, on Friday, Bank Nifty outperformed Nifty as a sharp correction was seen in Reliance after the government increased the export tax on the gasoline, diesel and ATF,” Bisht added.
For the week ended July 1, 2022, BSE Sensex closed at 52,907.93 points, a recovery of 179.95 points or 0.34%, from the previous week’s close of 52,727.98 points. Registering a heavy loss of 52.80 points or 0.33%, NSE Nifty ended the week at 15,752.05 points against 15,699.25 points a week ago.
Bisht predicts: “On the technical chart, oscillators such as the RSI and the Stochastic have ample room for upward movement. would act as a trading zone for the index.”
The Indian VIX fell 2.70% to the level of 21.25. “The implied volatility for calls closed at 21.37%, while that for puts closed at 22.59. The Nifty VIX for the week closed at 21.84%. The OI PCR for the week closed 1.28 higher than the previous week,” Bisht remarked.
The June series saw the Nifty slipping and ending the series at 15,778 levels. Series on series, the Nifty closed the June F&O series with a loss of 2.41% and the Bank Nifty also ended in negative at 33420 down a steep 4.78%.
On the open interest front, the Nifty added 35% and starts the July series with 127.65 lakhs of shares in open interest. On the rollover front, Nifty saw 74.81% lower rollover than previous 78.85% and a three-month average of 79.71% and with a rollover cost of -35.9 points and with an addition in open interest, this indicates some of the shorts in the Nifty has been carried over.
FII net shorts have declined significantly over the past week to just over a lakh of contracts. However, the net shorts are always higher, suggesting limited benefits. On the other hand, net long positions in equity futures remained higher, indicating an equity-specific accumulation. Rolling positions in the July series is likely to increase stock-specific volatility toward settlement, ICICIdirect.com said in its report.
The NSE Banking Index closed the week at 33,539.45 points, a significant drop of 88 points or 0.26%, from the previous week’s close at 33,627.45 points.
Nifty Bank, on the other hand, saw a 38 percent addition in OI with price increases indicating the building of shorts seen in the index. Bank Nifty recorded a turnover of 87.42% against 85.47% and a three-month average of 87.23% with a cost of turnover of -28.15 points. With high turnover, the Bank Nifty saw shorts being carried over to the next series.