5 cues from F&O market: Buy on dips for a target of 8,900 on Nifty50
NEW DELHI: The Nifty50 closed below its crucial resistance level of 8,800 on Friday, but fresh Put writing at strike prices 8,700 and 8,900 will lend support to index in case it starts drifting lower in the absence of any major triggers this week, options data showed.
The crucial hurdle for the index remained at 8,800, 8,900 and then towards 9,000. In case, the Nifty50 closes above 8,800 this week, chances of a rally towards 8,900 and then towards 9,000 cannot be ruled out.
But the index has already run a marathon and it needs to take rest before it can start its journey for fresh highs. Market rewards those who keeps the faith and have patience.
Put writing at strike prices 8,700 and 8,800 will keep the bullish momentum intact while Call writing at strike price 9,000 will be the next big hurdle for the index. Any dips towards 8,700 could be used as buying opportunity because the upside momentum remains intact.
"On the data front, the highest net Call and Put addition was seen at ATM strikes as Nifty consolidated during the week. However, long addition in futures space continued which indicates prevailing positive bias in the index,” ICICI Securities said in a note.
"With highest net addition seen at Put option of strike price 8,700 during the week, declines near these levels will be buying opportunity. With no major event visible in the near term and shortened settlement on February 23, we do not expect sharp declines in the market," it said.
Put option activity: Put writing was seen at strike price 8,500 (0.74 lakh contracts added), followed by 8,700 (3.7 lakh contracts added), 8,900 (0.94 lakh contracts added) and 8,800 (4.9 lakh contracts added).
Put unwinding was seen at strike price 9,000 (1.2 lakh contracts shed), followed by 9,100 (0.2 lakh contracts shed), and 8,600 (1.4 lakh contracts shed).
Total Put open interest of 61.49 lakh contracts stood at strike price 8,500, which will act as a crucial base for the market in the February series, followed by strike price 8,700 which saw an accumulation of 47.57 lakh contracts, while strike price 8,600 had 42.87 lakh contracts in open interest.
Image 1
Call option activity: Call writing was seen at strike prices 8,800 (0.2 lakh contracts added), 8,900 (0.4 lakh contracts added) and 9,000 (5.6 lakh contracts added), while Call unwinding was seen in strike prices 8,900 (3.5 lakh contracts shed), followed by 8,700 (0.76 lakh contracts shed), and 8,500 (0.6 lakh contracts shed).
The maximum Call open interest of 68.21 lakh contracts stood at strike price 9,000, which will act as a key resistance for the index in the February series, followed by strike price 8,800, which has accumulated 48.66 lakh contracts, while strike price 8,900 had 40.61 lakh contracts in open interest.
PCR: The Nifty50 Put-Call ratio (PCR) closed below 1 at 1.19. A PCR above 1 is considered bullish while a PCR below 1 is considered bearish.
India VIX: The India Volatility Index (VIX), a gauge of the market's short-term expectation of volatility, contracted by 0.4 per cent to 13.17 on Friday compared with 13.23 recorded in the previous session.
Nifty Bank: Nifty Bank futures saw closure of 7 per cent open interest after witnessing sharp 45 per cent addition in the previous weeks. As the index moved and closed above 20,000, the OI base is getting formed at the Put option of strike price 20,000 .
"The index is likely to move towards 21,000 in the coming days. In the case of any major sell-off, the index is likely to witness some cushion near 19,900," said the ICICI Securities note.
"The price ratio of Nifty Bank /Nifty has moved towards 2.30 after taking support near 2.24. We feel the outperformance of banking stocks may continue in the coming days as the SBI results also didn't have any major negative surprise," it said.
The crucial hurdle for the index remained at 8,800, 8,900 and then towards 9,000. In case, the Nifty50 closes above 8,800 this week, chances of a rally towards 8,900 and then towards 9,000 cannot be ruled out.
But the index has already run a marathon and it needs to take rest before it can start its journey for fresh highs. Market rewards those who keeps the faith and have patience.
Put writing at strike prices 8,700 and 8,800 will keep the bullish momentum intact while Call writing at strike price 9,000 will be the next big hurdle for the index. Any dips towards 8,700 could be used as buying opportunity because the upside momentum remains intact.
"On the data front, the highest net Call and Put addition was seen at ATM strikes as Nifty consolidated during the week. However, long addition in futures space continued which indicates prevailing positive bias in the index,” ICICI Securities said in a note.
"With highest net addition seen at Put option of strike price 8,700 during the week, declines near these levels will be buying opportunity. With no major event visible in the near term and shortened settlement on February 23, we do not expect sharp declines in the market," it said.
Put option activity: Put writing was seen at strike price 8,500 (0.74 lakh contracts added), followed by 8,700 (3.7 lakh contracts added), 8,900 (0.94 lakh contracts added) and 8,800 (4.9 lakh contracts added).
Put unwinding was seen at strike price 9,000 (1.2 lakh contracts shed), followed by 9,100 (0.2 lakh contracts shed), and 8,600 (1.4 lakh contracts shed).
Total Put open interest of 61.49 lakh contracts stood at strike price 8,500, which will act as a crucial base for the market in the February series, followed by strike price 8,700 which saw an accumulation of 47.57 lakh contracts, while strike price 8,600 had 42.87 lakh contracts in open interest.
Image 1
Call option activity: Call writing was seen at strike prices 8,800 (0.2 lakh contracts added), 8,900 (0.4 lakh contracts added) and 9,000 (5.6 lakh contracts added), while Call unwinding was seen in strike prices 8,900 (3.5 lakh contracts shed), followed by 8,700 (0.76 lakh contracts shed), and 8,500 (0.6 lakh contracts shed).
The maximum Call open interest of 68.21 lakh contracts stood at strike price 9,000, which will act as a key resistance for the index in the February series, followed by strike price 8,800, which has accumulated 48.66 lakh contracts, while strike price 8,900 had 40.61 lakh contracts in open interest.
PCR: The Nifty50 Put-Call ratio (PCR) closed below 1 at 1.19. A PCR above 1 is considered bullish while a PCR below 1 is considered bearish.
India VIX: The India Volatility Index (VIX), a gauge of the market's short-term expectation of volatility, contracted by 0.4 per cent to 13.17 on Friday compared with 13.23 recorded in the previous session.
Nifty Bank: Nifty Bank futures saw closure of 7 per cent open interest after witnessing sharp 45 per cent addition in the previous weeks. As the index moved and closed above 20,000, the OI base is getting formed at the Put option of strike price 20,000 .
"The index is likely to move towards 21,000 in the coming days. In the case of any major sell-off, the index is likely to witness some cushion near 19,900," said the ICICI Securities note.
"The price ratio of Nifty Bank /Nifty has moved towards 2.30 after taking support near 2.24. We feel the outperformance of banking stocks may continue in the coming days as the SBI results also didn't have any major negative surprise," it said.
