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Nifty: Positive bias remains with support near 17100...

* The Nifty gained another 3.5% last week amid fresh FII inflows after the US Fed chairman’s comment on economy and policy. Indian indices have outperformed almost every indices and across the sector movement was observed. None of the sectoral indices closed the week negative. Moreover, midcap and small cap indices also gained more than 4% last week suggesting broader participation

* The volatility index has risen sharply last week and even moved above 15 levels as a sharp up move has triggered Call option writers to close their positions and move to much higher strikes. We believe in the current scenario, instead of looking at Call bases, one should focus on Put bases and remain positive till the Put bases are not breached. Currently, ATM 17200 and 17000 strikes are holding significant open interest and one should trade positive above these levels

* From the futures perspective, Nifty open interest has risen further and current OI of almost 1.5 crore shares is highest seen since February 2020. At the same time, FIIs’ net longs have also increased near 61000 contracts suggesting ongoing positive bias. Hence, till we do not see closure of positions, buy on declines strategy should continue

* Sectorally, we believe banking would lead from here onwards while technology stocks may see some consolidation after significant outperformance of the last couple of months. At the same time, metal, PSU stocks may witness further gains in the coming sessions

Bank Nifty: Positive bias should continue above 36000 levels…

* The banking index reverted sharply from lows and finally was able to move out of the long consolidation seen below 36000. While it still lags in terms of performance vis-à-vis Nifty, we believe it is likely to catch up in the coming sessions and may move towards its February highs near 37800 in coming weeks. On downsides, we believe levels near 35800 and 36000 should act as immediate support and only below these levels should one change their bias

* From an options perspective, significant options writing is evident at OTM Call strikes as stuck up option positions have moved to OTM strikes as the Bank Nifty moved above 36000. We believe positive bias in the banking index should continue till the banking index sustains above 36000

* Bank Nifty futures open interest has also risen sharply last month along with the up move seen in the index. We believe fresh longs positions have been formed. Hence, continuance of up move cannot be ruled out in the short-term

* The price ratio of Bank Nifty/Nifty remains near lows of 2.13 as it failed to perform in line with the market. However, the current price ratio is one of the lowest in the current year while further underperformance may not be seen. We believe sectoral rotation should help the banking space to start performing once again

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