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The Bank Nifty needs to hold above 22,500 to witness some stability and move towards 23,200.
Chandan Taparia
Greed and Fear Indicator: Volatility needs to cool down (VIX CMP – 20.71)
India VIX fell by 6.50 percent from 22.15 to 20.71 levels. VIX has fallen at its lowest closing level of the week but needs to cool down below 20-18 zone to get the bulls' grip for the next leg of the rally.
CBOE VIX: CBOE VIX was down by 12.62 percent from 30.75 to 26.87 levels. Volatility has fallen but needs to cool down further for the bulls to tighten their grip.
Fund Flow: FIIs continue to bet on recovery of stocks
In the cash segment, FIIs turned net buyers on September 10 and 11 but overall were net sellers to the tune of Rs 8 crore. DIIs were net sellers worth Rs 1,501 crore. The Long Short Ratio ranged from 55 percent to 59 percent in the week to close near 55.9 percent. On the FIIs derivatives front, there was short-covering in the index futures and long built up in stock futures.
Safe Haven: Gold fading glitter (Gold, MCX CMP – Rs 51,378 per 10 grams)
Gold prices were up by 1.3 percent on a week-on-week basis. The metal traded in a very narrow band, hovering near its 50 DMA, closing in positive compared to the previous week. It negated its formation of lower tops of the last three weeks. The precious metal is forming a descending triangle on the daily frame and negated its higher tops formation after four trading sessions.
Silver, too, traded in a narrow range, closing up by 0.99 percent on a week-on-week basis.
Option Data: Nifty immediate range 11,200 to 11,700 (Nifty CMP – 11,464, Bank Nifty CMP – 22,480)
The Nifty futures closed the week with gains of 0.89 percent with addition in futures Open Interest (OI) by 1.19 percent on a weekly basis, which indicates a long build up. During the week, the put call ratio (PCR) based on Open Interest (OI) of the Nifty moved in between 1.20 to 1.57 levels and closed the week with PCR OI of 1.49, which indicates that strength is building in the market.
On the options front, maximum Put open interest was at 11,000 followed by 10,500 strike, while maximum Call open interest was at 11,500 followed by 12,000 strike. We have seen Call writing at 12,000 then 11,500 strike while Put writing was seen at 11,300 then 11,400 strike. Option data suggests a wider trading range in between 11,200 to 11,700 zones.
The Bank Nifty futures closed the week with a loss of 1.85 percent, with addition in Open interest by 13.37 percent on a weekly basis that suggests a short build up. PCR based on Open Interest remained in between 0.67 to 0.87 and the Bank Nifty closed the week in its upper band, suggesting some stability but the structure is under the pressure.
Implied volatility (IV) of the banking index reduced to 31 levels as the week concluded. Maximum Put OI is at 21,000 followed by 22,000, while maximum Call OI is at 22,500 followed by 23,000. We have seen Call writing in 25,000 and 22,500 while Call unwinding and Put writing at 22,000 and 22,500 strikes.
India Rupee: Rupee shoots (USD/INR CMP – 73.43)
The USD/INR pair was marginally up by 0.19 percent on a week-on-week basis. It has negated its lower highs-lower lows formation, which means the rupee slipped into losses after four successive weekly gains. The greenback continues to trade below its 200-DMA but saw volatile movements. India-China tensions could further fan the volatility .
Crude Oil: Oil flowing down (Crude Oil WTI, MCX CMP – Rs 2,737 per barrel)
Oil was down by 5.71 percent on week-on-week basis. It gave a breakdown from its narrow range on the daily frame and continued to remain under pressure as supplies have gone up due to the prolonged pandemic.
DJIA: Correction with sideways movement (DJIA CMP – 27,666)
The Dow Jones was down 1.66 percent on a week-on-week basis and was taking support at its 50 DMA. It negated its northward movement on the weekly scale. Profit-booking was seen in Wall Street and it wiped out its earlier gains.
The Nifty has to hold above 11,333-11,350 to witness an upmove towards 11,550-11,600. On the downside, the medium-term support exists at 11,200-11,180. The Bank Nifty needs to hold above 22,500 to witness some stability and move towards 23,200. If it fails to maintain 22,222, then it can the rate-sensitive index can slip towards 21,750 then lower.
(The author is Vice President – Research Derivatives & Technical Analyst at Motilal Oswal Financial Services.)
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