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Nifty: Volatility in expiry may trigger some direction…

* The Nifty moved back to its consolidation range of 15600 to 15900 again and despite breaching 15600 levels in intraday, recovered and closed the week with a marginal loss of almost 0.5%. Some pause was observed in the broader markets as well and small cap and midcap indices closed the week marginally negative 

* On the options front, the options activity is concentrated at ATM strikes of 15800 for both Call and Put. While the highest Call base is at 16000 strike, Put base is highest at 15800 strike. Hence, prima facie, a move below 15750 should trigger downside towards 15500. On higher side, we believe retesting of last week’s high itself may trigger short covering momentum, which may take the Nifty towards 16200 levels

* Sectorally, banking has relatively underperformed last week and moved towards its lower band of the range while technology stocks have largely compensated

* Volatility index has moved back below 12 levels after testing 14 last week. During the month, on multiple occasions, it has found resistance around these levels. We believe move above 14 levels for volatility index should be considered negative. Including the weekend, we have results from almost 16 Index companies, which may trigger some volatility

Bank Nifty: Sustainability above 35000 important for continued move…

* Post HDFC Bank’s result, the Bank Nifty saw aggressive profit booking and moved towards its sizeable Put base of 34500. However, a trend reversal was seen on weekly expiry day and it managed to move near 35000 levels

* Despite aggressive profit booking in broader indices, IVs remained muted. This is still pointing towards lack of direction and continuance of trading range. We feel IVs will remain choppy and are unlikely to close above 15% in coming days

* Huge Call additions were observed in 35000 and 35500 strike Calls. However, sustainability of a move above 35000 is important to continue the upward bias. In that scenario, the banking index may retest its major hurdle of 36000 during settlement. On the lower side, 34500 remains immediate and crucial support for the banking index

* As rollover activity picks up pace, we may see stock specific triggers. However, stocks like Axis Bank, SBI and Kotak Mahindra Bank along with others look good from current levels, which should help the Bank Nifty to hold 34500 on a closing basis. We feel the index would consolidate in coming days and fresh up moves are expected towards 36000 levels

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