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Nifty: Consolidation expected in range of 17500-18000…

* The Nifty started the new year on a strong note and gained momentum with the help of the banking space. Despite the profit booking seen towards the end of the week, the Nifty managed to gain another 2.5% last week. Markets lost some of the momentum after release of FMOC meeting minutes where tighter monetary conditions were expected in the second half of the year. However, broader markets continued to outperform as both the midcap and small cap space gained nearly 2% each

* While the Nifty almost tested 18000 last week, for the coming weekly settlement we believe these levels will remain crucial resistance as significant Call writing is visible at this strike. On downsides, the highest Put base is currently placed at 17500 strike, which should act as important support. Hence, consolidation is likely to be seen in the index ahead of results season with support near 17500

* The open interest in the Nifty has not increased much and remained subdued near 1.1 crore shares despite recent up move and action was primarily limited to the banking space. While FIIs have seen buying in the secondary markets recently, considering overall activity gross figures are still low. We expect to find some clues from next week onwards

* On the volatility front, India VIX has not subsided below 16 levels despite the move and finally closed the week near 17.5. With technology heavyweights results next week, we expect volatility to remain higher. We believe positive bias should be maintained till it is below 18 levels

Bank Nifty: Intermediate support for index at 37500…

* The Bank Nifty started the January series with a sharp up move and gained almost 6.5% last week. The January series has started with high short rollover. As the series progressed, we saw closure in these short positions. Last week, ~13% closure was observed in the futures segment

* Most private as well as PSU banks performed well in the current leg of the rally towards 38000. The Bank Nifty has significantly outperformed the Nifty. Going ahead, we feel this outperformance should continue. Continued short covering ahead of results may continue to provide support to the banking space at lower levels

* Most Put writing positions are moving higher along with up move in the index. Now the major Call OI concentration is at 38000 strike, which remains the key level to watch on upsides. Once the index manages to close above this level, further upsides are expected

* From a short term prospective, the Bank Nifty should find support near 37500 levels. However, looking at the quantum of Put OI, we feel even if the index violates 37500 levels, downsides would be limited and dips should be utilised to create fresh long positions

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