Put Call Ratio based on Open Interest of Bank Nifty remained between 0.75 and 0.97 and it closed the week with PCR OI at the lowest range which suggests a grip of Call writers with multiple hurdles at higher zones.
Chandan Taparia
India VIX fell by around 4 percent on weekly basis to 21.67 levels. A small uptick in VIX could see a pause in positive momentum but overall lower volatility suggests limited downside and support based buying could again emerge at lower levels.
Greed and Fear Indicator: Volatility hovers around 21 levels (VIX CMP – 21.67)
CBOE VIX: CBOE VIX was down by 0.72 percent at 22.05 and is consolidating in a range from last couple of days. It continued its decline for the eighth week in a row but formed a Doji candle on weekly frame which indicates some rangebound market bias.
Fund Flow: FIIs investment brings strength to the market
In the cash segment, FIIs were net buyers for worth Rs 2,130 crore shares. FIIs continued to invest in the Indian markets with the growth potential intact. DIIs, on the other hand, have been net sellers worth Rs 4,421 crore in the week. On the FIIs derivatives front, there was long built up in index futures and short built up in stock futures. The Long Short Ratio ranged from 52 percent to 59 percent in the week and is currently 58.4 percent.
Safe Haven: Safe haven turns volatile (Gold, MCX CMP – Rs 52,451 per 10 gram)
The rally in the gold met with a speed breaker. Gold fell to Rs 50,000 levels but managed to settle the week at Rs 52,451. On weekly basis it was down by 4.7 percent. The immense fluctuation was due to the heightened geo-political uncertainty and the ongoing US-China trade tensions. The precious metal saw correction from higher zones but took support at its 50 DMA on daily frame. It negated its formation of higher lows on weekly frame.
Among other precious metals, silver declined sharply by 9.3 percent on week-on-week basis.
Option Data: Nifty immediate range 11,000 to 11,400 (Nifty CMP – 11,178, Bank Nifty CMP – 21,679)
Nifty future closed the week with marginal loss of 0.94 percent with decline in futures Open Interest by 0.45 percent on weekly basis which indicates liquidation of long positions and some profit booking at higher levels. During the week, Put Call Ratio based on Open Interest of Nifty moved in between 1.31 to 1.59 levels and closed the week at the lower band of PCR OI of 1.31 which doesn't bode well for the bulls to see range breakout.
Maximum Put open interest is at 11,000 followed by 10,000 strike, while maximum Call open interest is at 11,500 followed by 12,000 strike. We have seen minor Call writing at 11,200 and 11,300 strike while Put writing is at 11,100 then 10,800 strike. Option data suggests an immediate trading range of 11,000 to 11,400 zone for coming few days.
Bank Nifty future closed the week with the loss of 1.31 percent with addition in Open interest by 16.44 percent on weekly basis which suggests some longs added at the time of upmove during the week as it moved towards 22,500 levels but a decline towards the end of the week taken it back to 21,700 levels and now long liquidation could happen to restrict its upmove. Put Call Ratio based on Open Interest of Bank Nifty remained in between 0.75 to 0.97 and it closed the week with PCR OI at the lowest range which suggests a grip of Call writers with multiple hurdles at higher zones. However, implied volatility (IV) of Banking index has fallen and is hovering around 30 level which is ruling out any major dip. Maximum Put open interest is at 20,000, while maximum Call OI is at 23,000 and 22,500 strike. We have seen Call writing in 21,500 while unwinding at 24,500. Put writing is at 20,000 strike.
India Rupee: Rupee consolidates in range (USD/INR CMP – 74.87)
The USD/INR pair closed marginally down by 0.2 percent on week-on-week basis. The greenback has been trading flat. US - China trade tensions continue and is going to drive the dollar.
Crude Oil: Oil prices are choppy (Crude Oil WTI, MCX CMP – Rs 3,130 per barrel)
Oil is trading near its 200 DMA on daily scale and was up by 2.07 percent on week-on-week basis. The rising number of cases and slower start to the economic recovery are keeping the prices rangebound.
Dow Jones: Look out for key levels (DJIA CMP – 27,931)
The Dow Jones Industrial Average came out of its weekly range for a fresh leg of rally and touched 28,000 levels. It was up by 1.8 percent on weekly basis. It has surpassed its previous hurdle of 27,600 levels. Lower levels of VIX has supported the bullish trend in US indices.
Moving forward, Nifty has to cross and hold above 11,250 zone to witness an upmove towards 11,400-11,500 zones while on the downside key support exists at 11,000. Bank Nifty has to cross and hold above 22,000, to witness an upmove towards 22,500-22,750 while on the downside immediate support is seen at 21,250-21,000 levels.
The author is Vice President – Research Derivatives & Technical Analyst at Motilal Oswal.
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