F&O data set-up suggests immediate trading range of 11,700-12,100 for Nifty

Futures & Option data: Nifty's immediate range 11,700-12,100 (Nifty CMP – 11,914, Bank Nifty CMP –23,846)

The Nifty futures closed the week 4.32 percent higher with addition in futures Open Interest (OI) by 28.4 percent on a weekly basis, which indicates longs are being built up. During the week, Put Call Ratio (PCR) based on Open Interest of Nifty moved in between 1.37 and 1.60 levels and closed the week in the higher band, suggesting a bullish stance as it indicates that Put writers are more in number than Call writers.

On the options front, maximum Put OI is at 11,500 followed by 11,000 strike, while maximum Call OI is at 12,500 followed by 12,000 strike. We have seen marginal Call writing in 12,400 and 12,200 strike while Put writing was seen at 11,500 then 11,800 strike. Option data suggests a wider trading range in between 11,500 to 12,200 levels while an immediate trading range in between 11,700 to 12,100 zones.

The Bank Nifty futures ended the week 7.11 percent higher with addition in Open interest by 11.19 percent on a weekly basis, which again suggests long buildup. Put Call Ratio based on Open Interest of Bank Nifty remained in between 0.88 to 1.27 and it closed the week at its upper band again suggesting bull's grip. IV of the banking index increased to 35 levels as the week concluded. Maximum Put OI is at 22,000 followed by 23,000, while maximum Call OI is at 24,000 followed by 23,000. We have seen Call writing in 24,000 while Call unwinding at 23,000. Put writing is witnessed at 23,500 with unwinding at 22,500 strike.

Sector-wise breakup: IT and banking stocks drive index up and up

Long buildup was seen in the automobile, banking, capital goods, cement, FMCG, infrastructure, pharma, reality and technology sectors. Short buildup was seen in metal, oil & gas and power sectors and long liquidation in media and telecom stocks.

Fund flow: FIIs start October on a positive note

In the cash segment, FIIs started October on a positive note and continued buying until the end of the week when they turned net sellers. The week summed up positive to the tune of Rs 3,371 crore. DIIs, on the other hand, ended the week as net sellers to the tune of Rs 2,389 crore. The Long Short Ratio ranged from 63.97 percent to 71.56 percent to close the week in the higher band. On the FIIs derivatives front, there was long buildup in index futures and short in stock futures.

Moving forward, the Nifty has to continue to hold above 11,800 to move towards 12,000 then 12,200 while on the downside, major support exists at 11,750. The Bank Nifty now has to continue to hold above 23,500 to witness an upmove towards 24,200 then 24,500 zones while on the downside, key support exists at 23,200 then 23,000.

(Chandan Taparia is the Vice President – Research Derivatives & Technical Analyst at Motilal Oswal Financial Services.)