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Nifty: Consolidation likely to continue with support at 15600…

* The Nifty closed the July series near its VWAP levels of 15780 amid significant stock specific action. The index remained largely in the range of 15600-15900 for the last two months. Sectoral rotation was the key where technology and metal space were clear outperformers and compensated for the weakness in banking and auto stocks. On a monthly basis, while the Nifty closed the month almost flat, midcap and small cap indices gained almost 4% and 8%, respectively, suggesting broader outperformance

* From an options perspective, the highest option base remains at ATM 15800 strike for both Call and Put strikes for the coming weekly expiry. Hence, a major directional move may not be seen. We believe that breach of ongoing trading range of 15600-15900 on a closing basis should trigger fresh directional bias for another 300 points

* Since most index heavyweights have already declared their quarterly results, global cues may dictate the next round of directional move. Considering significant selling from FIIs was absorbed during July, where they have sold more than | 19000 crore in secondary markets, any change of stance may take the Nifty above its ongoing trading range

* OI in the Nifty at the inception of the August series is one of the lowest we have seen since September 2020. Continued range bound movement in the index may have caused the current low OI. We believe a fresh directional move should trigger fresh OI build-up in coming sessions

Bank Nifty: Covering expected only above 35000 levels…

* The Bank Nifty ended the July series marginally lower compared to last month as most private banks remained under pressure post their quarterly numbers. Compared to private players, PSU banks did well, which kept the bias positive

* As the Nifty started with a lower OI base, the Bank Nifty started the August series with 2 million shares, which is higher compared to last month. Along with this, rollover spread rose in the expiry week is indicating short rollover for August. However, we feel closure in this positions should provide some recovery

* For the week, the highest Call OI base is placed at 35000 strike followed by 35500 whereas Put OI base is intact for the past few weekly expiry, which is placed at ATM strike of 34500. Looking at OI data, we feel the index should continue to remain in a range

* In this current leg of consolidation, we feel stock specific action would be there where stocks like Federal Bank, HDFC Bank, IDFC First bank and the PSU pack are likely to do well

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