IGI Logo

Nifty: Crucial support at 15600 for positive bias to continue…

* After the continued range bound movement seen in June, the first week of the July series also remained lacklustre. Despite positive US equities, emerging markets remained under pressure as the Dollar index moved sharply higher. For the week, the Nifty shed almost 0.8% whereas broader markets continued to outperform and closed in the green

* On the sectoral front, due to continued range bound movement and declining IVs, option writers have maximum positions at ATM strikes. For the coming week as well, 15700 Put and 15800 Call hold the highest option base where 15800 Call holds more than 40 lakh shares. We believe the result season may provide some trigger to move out of the prevailing range of 15600-15900

* Activities in Nifty futures remained muted last week as well. However, FIIs have created fresh shorts in the index while their net longs have declined from 90000 contracts to just 56000 contracts since June settlement. Hence, it feels like some short bias from FIIs is building up

* India VIX continued to move lower and declined sharply in the last few sessions. From the reading of above 15 seen during the June settlement, it has declined near 12 in just over a week, indicating significant option writing at ATM strikes. A small trigger can infuse sharp volatility where a directional move of 3-4% cannot be ruled out

Bank Nifty: 34500 remains important for outperformance to continue…

* The Bank Nifty remained under pressure since mid-May due to aggressive Call writing in most private banks. However, July series acted as a turning point where the index managed to close at a six-month high. Broad based participation was seen from most private banks whereas PSU banks continued their upward journey

* On the weekly expiry day, the Bank Nifty saw a sharp reversal but managed to hold firm above its sizeable Put base of 35000. Despite sharp moves in IVs, volatility remained choppy due to which option writers are shifting position towards ATM strikes

* The OI in the Bank Nifty remained lower since July. However, in the last two days, it saw addition as the index reverted from 35800. We feel short positions have been formed in the index. Once it manages to close above its sizeable Call base of 36000, aggressive covering is expected

* Despite a sharp reversal from higher levels, OI position in 35000 and 34500 Puts remained intact. For the week, highest OI buildup is placed at 34500 strike, which remains the strong support. Till the index does not violate this level, outperformance in banking stocks should continue

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Views express by all participants are for information & academic purpose only. Kindly read disclaimer before referring below views. Click Here For Disclaimer