Nifty future closed the week with the gains of 2.68 percent with addition in Open Interest by 7.46 percent on weekly basis which indicates built up of long position as it managed to hold 11,000 levels and headed towards 11,250 levels.
Chandan Taparia
Greed and Fear Indicator: Volatility hovers around 25 levels (VIX CMP – 24.54)
India VIX moved up by 1.57 percent from 24.16 to 24.54 levels. Despite the slight upmove, the overall lower volatility is supporting the bullish market setup. Lower VIX with overall rising Put Call Ratio suggests the emergence of multiple supports with buy on any decline in the market. Nifty Implied Volatility (IV) remained consolidative for the most part of the week but increased marginally by 1.57 percent from 24.16 to 24.54.
CBOE VIX: CBOE VIX was down by 0.62 percent at 25.84 and is hovering around this level. It continued its decline for the fifth week in a row.
Fund Flow: FIIs investment to lift market sentiment
FIIs were buyers in the cash segment this week pumping in Rs 7,792 crore. DIIs, on the other hand, had an offsetting position and were net sellers for the entire week and sold worth Rs 5,323 crore. However, FIIs buying has had a greater impact on the market. On the FIIs derivatives front, there was marginal short built up in index futures and short built up in stock futures. With shorts building in derivatives with PCR OI reaching its highest levels in 2 months signals caution ahead. The Long Short Ratio decreased and is hovering around to 51 percent.
Safe Haven: Investors seek shelter under the safe haven (Gold, MCX CMP – Rs 51,123 per 10 gram)
Gold rose up by 4.3 percent on a week-on-week basis. The yellow metal is up for the seventh month in a row. It broke out from its rising channel on the daily scale and is now at its lifetime high levels. People are parking their investment in the precious metal as the coronavirus is multiplying. Risk averseness of investors should keep the support intact.
Among other precious metals, silver surged 15.8 percent on week-on-week basis.
Option Data: Nifty immediate range 10,800 to 11,500 (Nifty CMP – 11,194, Bank Nifty CMP - 22,662)
Nifty future closed the week with the gains of 2.68 percent with addition in Open Interest by 7.46 percent on a weekly basis which indicates built up of long position as it managed to hold 11,000 levels and headed towards 11,250 levels.
During the week, Put Call Ratio based on Open Interest of Nifty remained in between 1.76 to 1.90 levels and closed the week with PCR of 1.74 which gives comfort to bulls in the market. On monthly option front, maximum Put open interest is at 11,000 followed by 10,000 strike, while maximum Call open interest is at 11,500 followed by 11,200 strike. We have seen Call writing in 11,200 then 11,300 strike while Put writing was seen at 11,100 then 11,000 strike. Maximum Put open interest at 11,000 zone suggests medium-term positional support at 11,000 mark while fresh Put writing at 11,100 and 11,000 strikes hints immediate key support at 11,000 zone.
Option data suggests a wider trading range in between 10,800 to 11,500 levels while the immediate range is seen between 11,000 to 11,350 levels.
Bank Nifty future closed the week with the gains of 3.17 percent with a decent jump in Open interest by 9.62 percent on a weekly basis which suggests built up of long position as it managed to hold 22,500 levels. Put Call Ratio based on Open Interest of Bank Nifty remained in between 0.92 to 1.16 and closed the week with PCR OI of 0.90 which suggests a grip of Call writers with multiple hurdles at higher zones. However, IV of Banking index fallen from 36 to 35.20 level which is ruling out any major dip. Maximum Put open interest is at 22,000, while maximum Call OI is at 23,000 strike. We have seen Call writing in 23,000 then 23,500 strike while Put writing is at 22,000 strike.
India Rupee: Rupee brings upbeat mood (USD/INR CMP – 74.76)
The USD/INR chart was marginally down by 0.18 percent on a week-on-week basis. It has formed a descending triangle on the daily chart and is consolidating in a range. The rupee strengthened as Nifty extended its gains towards 11,200 mark. The surge in geopolitical tensions and the increasing virus-related cases is derailing the economic recovery.
Crude Oil: Oil waiting to move out of range (Crude Oil WTI, MCX CMP – Rs 3,076 per barrel)
Oil was marginally up by 0.75 percent on a week-on-week basis and is consolidating in a muted range. It is moving in a rising channel. Demand remained steady due to the rising concerns of the virus. Prices are trading below its 200 DMA which indicates a flattish week ahead.
DJIA: Look out for key levels (DJIA CMP – 26,469)
Dow Jones was down marginally by 0.75 percent on weekly basis and closed around 26,500 levels. It is consolidating above its 200 DMA and should remain here for the coming week as indicators have moved down from the overbought zones.
Moving forward, Nifty has to continue to hold above 11,050-11,100 levels to extend its move towards 11,500 zones while on the downside support is seen at 11,000. Bank Nifty needs to hold above 22,750 to witness an upmove towards 23,200 then 23,500 levels while on the downside support is seen at 22,400 levels.
The author is Vice President – Research Derivatives & Technical Analyst at Motilal Oswal Financial Services.
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