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Nifty: Move above 18100 crucial for fresh uptrend…

* After continued profit taking was seen in the last week of October, the first short week of the November series was lacklustre ahead of Fed outcome. Despite positive US equities, domestic markets remained under pressure at higher levels. For the week, the Nifty gained almost 0.8% whereas broader markets continued to outperform and closed in the green

* The Nifty November series has started with little over 10 million shares, which is relatively low compared to the last couple of months. We have not seen major movement with low open interest. Furthermore, as the Nifty has breached its major Put base of 18000 and October series VWAP of 18100, these levels should act as immediate hurdle on the higher side. On downsides, we expect major Put base of 17500 to act as support for the Nifty

* We feel the Nifty is likely to consolidate in the broader range of 17600-18100 with stock specific activity for the week. The analysis of ratio with sector against Nifty show that outperformance is likely to continue in the Bank Nifty, Auto, Financial services and PSU banks whereas the outperformance of the IT index may possibly end. Nifty Metal and Pharma Index may try to consolidate and recover their relative outperformance against the Nifty

* Volatility index has tested its monthly highs near 18% before closing the week below 17 levels on the back of closure among Put writers. Looking at elevated IV market participants should remain cautious at higher levels.

Bank Nifty: Meaningful recovery expected only above 40200…

* Post sharp selling in the October expiry week, the Nifty as well as Bank Nifty found support near its sizeable Put base where Bank Nifty had relatively outperformed. PSU banks were leaders, finding more traction post the quarterly number of SBI. Private banking players largely consolidated, which helped the index to sustain at higher levels

* The open interest in the Bank Nifty for the November series rose ~8% with positive price action, which is a good sign. We believe apart from Axis Bank other private players would support the index whereas PSU would continue to outperform

* Major Call OI base is distributed from 40000 to 41000 strikes. However, last week’s high near 40200 should act as a trigger point for closure of Call writing positions in the Bank Nifty. This should help the index to move higher. In case of any profit booking from higher levels, we feel multiple supports are placed for the index on lower side. Major Put writing in the index is near its ATM strike of 39500. We feel intermediate support is placed at the current price itself

* The current price ratio of Bank Nifty/Nifty has remained near 2.20 as recommended earlier. However, support for the same is near 2.18 levels. We continue to believe the price ratio would move towards 2.26 levels on the back of out in the Bank Nifty.

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