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Nifty: Series VWAP levels of 17950 crucial hurdle in expiry week

* The Nifty remained under pressure throughout the week and after opening near 18200 on Monday, it moved below 17700 on Thursday, losing almost 2% during the truncated week. Meanwhile, it has retraced gains of the last two weeks and closed at the lowest levels of the month. Even midcap and small cap indices came under pressure last week and shed more than 1% each

* From an options perspective, significant Call addition was observed at 18000 Call strike for the coming monthly settlement. At the same time, no major Put base is visible and highest Put base is at 17500 strike. The VWAP of the series is at 17950. Considering settlement week, continued directional move is expected and VWAP levels of 17950 should remain a critical resistance for the monthly settlement. On downsides, we believe the Nifty may move towards 17500 in the coming sessions

* The leverage positions in index futures remained on the lower side and despite high volatility, no major addition was observed last week while cumulative open interest in Nifty futures moved further low near 1 crore shares. Domestic institutions are significantly short in index as well stock futures while retail participants are primarily long

* From a sectoral perspective, while banking continued to underperform, significant sectoral rotation was observed last week and stocks from the pharma and auto space exhibited significant volatility in both directions. Going ahead, we expect supportive action from the FMCG and banking space whereas technology may come under pressure.

Bank Nifty: Close below 38000 to further weaken banking stocks

* Since the last weekly settlement, the Bank Nifty fell almost 700 points compared to the Nifty loss of near 100 points, which clearly shows underperformance by the banking space for a second week in a row

* Major private banks witnessed aggressive profit booking during the week and most of them moved near to their Put base. PSU, which was doing relatively better, also fell. On the back of all this, the Bank Nifty violated its major support of 38500 and moved way below these levels

* For the main expiry, aggressive Call writing blocks were observed in 38500 and 39000 strike Calls whereas no major Put writing blocks have been observed as of now. We feel multiple resistance is placed for the Bank Nifty on the higher side and major reversal of current profit booking trend is expected only above 39000

* Highest Put base for the index is at 38000, below which more selling is expected. However, as highlighted last week, we continue to expect the Bank Nifty to underperform broader indices while the current price ratio of Bank Nifty/Nifty which is near 2.14 levels should slide towards 2.08.

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