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Nifty: Positive bias to remain intact with support near 16400

* The Nifty continued its momentum and tested 16500 as it closed the week with gains of more than 1%. Heavyweights from the technology space took the front seat and helped the Nifty to move higher. However, some profit taking was seen in the broader markets where midcap and small cap indices closed the week negative and shed more than 1% each

* From a data perspective, continued writing was experienced among Put strikes throughout the August series when the Nifty breached its prevailing range of 15600-15900. In such a scenario, positive bias should continue till it holds its major Put base. For the coming week, the highest Put base is placed at the 16400 strike, which should act as immediate support on any decline. An extended profit booking towards 16000 can be expected only below these levels 

* The current open interest in the Nifty is the highest seen since March 2020. In the current series itself, OI has increased almost 50% since inception. Hence, the positive bias remained in the index till we do not see any closure of positions in the coming sessions. On the higher side, the Nifty may move towards 16800 in coming sessions

* The volatility index moved above 13% levels despite continued up move, which is an indicator of closure among Call writers. Hence, the momentum may continue in the short-term. In such a scenario, trading long should be kept with stop loss near 16400 levels

Bank Nifty: Outperformance to continue in index with support pegged at 35500

* For a major part of the week, the Bank Nifty outperformed as the Nifty traded near 16300 whereas the Bank Nifty managed to sustain above its sizeable Call base of 36000. Among leaders, HDFC Bank continued to witness closure in OTM Call strikes, which is likely to keep the momentum intact whereas supportive action is expected from others as well

* During the week, Bank Nifty futures attracted fresh OI additions of 3% along with positive price action. We feel this current leg of upsides is likely to continue

* For the past two weeks, major Put writing was seen at 35500 strike, which remains the key support area. However, as the index closed above 36000, we feel Put OI shifting activity would move higher, which should provide more upsides in coming days

* The current price ratio of Bank Nifty/Nifty again took support near 2.18 levels. We feel that on the back of outperformance in banking stocks, the price ratio should move towards 2.24 levels in coming days. A sharp up move is expected in the index once it manages to move above 36500

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