Nifty 50 (18,826), the benchmark index, rose 1.4 per cent last week, whereas Nifty Bank (43,938) ended flat. The derivatives data also show bullish positioning by participants on Nifty 50, but there are no clear indications with respect to Nifty Bank. Below is an analysis on futures and options (F&O) data.

Nifty 50

The Nifty 50 June futures gained 1.4 per cent and closed the week at 18,899. While the contract went up, fresh buyers entered as indicated by cumulative Open Interest (OI) data – it went up to 118.2 lakh contracts on June 16 versus 112.1 lakh contracts on June 9. Besides, the price action shows that the contract saw a fresh breakout, adding to the positive sign.

The options data, too, exhibit similar bullish sentiment. The Put Call Ratio (PCR) of the nearest weekly and June monthly series stand at 1.17 and 1.38 respectively. Thus, traders have sold more put options with an expectation that the Nifty 50 will not fall. Option strikes with highest outstanding OI are considered as key levels. In that sense, the nearest support for the index are at 18,800 and 18,700 as put options of these strikes have considerable OI outstanding. On the other hand, resistance can be spotted at 19,000 and 19,100 as per the call option chain.

The F&O data suggest that the sentiment is bullish and more rally can be expected this week. Therefore, traders can implement suitable option strategies like bull call/put spread. Alternatively, traders with higher risk appetite can also consider going long on Nifty futures.

Derivatives outlook
Long build-up on Nifty futures hint at extension of rally
PCR of Nifty 50 weekly options is bullish
Monthly options’ PCR positive for both indices
Nifty Bank

The Nifty Bank June futures ended marginally lower at 44,043 on Friday as against the preceding week’s close of 44,118. There wasn’t much change with respect to the cumulative OI of futures as well. It stood at 27.7 lakh contracts on June 16 compared with 27.2 lakh contracts on June 9.

Notably, the futures witnessed some short build-up on Thursday but on Friday, there was significant short covering. Hence, as it stands, traders appear unsure about the direction of Nifty Bank.

As per the options chain, 44000-strike call as well as put options have the highest OI outstanding. Also, the 43500-strike put option too has considerable OI. Thus, Nifty Bank is likely to stay within the 43,500-44,000 range until the current weekly contracts expire. The direction of the break of this range will lend us cues about the next possible swing in price.

Nevertheless, there is some bearish bias. But if the index can sustain above 44,000, we might see a sharp rally. Given these expectations, a suitable options strategy can be a bear call ladder set up for net credit. Consider futures only if it moves out of the 43,500-44,000 range.