Nifty 50 (24,131) and Bank Nifty (52,056) gained 0.9 per cent and 1.8 per cent, respectively, last week, ending in the green for the second consecutive week. Here, we analyse the futures and options (F&O) data to gauge the sentiment.

Nifty 50

Nifty futures (December) (24,304) began last week with a gap-up. It was neither able to stretch the upside nor fail to sustain it. Effectively, the intraweek price action was mostly flat.

But there are certain positive signs. The premium at which the December futures trade over the spot index has gone up last week and the cumulative Open Interest (OI) fell as Nifty futures appreciated, denoting exit of shorts.

Also, the put-call ratio of December monthly options stood at 1.3 on Friday, meaning selling of a relatively greater number of puts compared to calls. Traders sell puts when their outlook is positive.

Nevertheless, the bulls are struggling to crack the barrier at 24,500 as shown by the chart. At the same time, Nifty futures remain above a key support at 24,000.

Given the prevailing price action, we can predict the path of the upcoming trend only after the December futures moves out of the 24,000-24,500 range.

Resistance points above 24,500 are at 24,800 and 25,250. On the other hand, support levels below 24,000 can be spotted at 23,500 and 23,200.

Strategy: Last week, we had suggested buying Nifty futures if it breaks out of 24,250. It had closed at 24,023 on November 22. But the contract opened with a gap-up at 24,355 on Monday (November 25). It marked an intraweek low of 24,056 on Thursday.

Traders who have initiated longs can hold because the support at 24,000 stays true. Maintain a stop-loss at 23,980. Going ahead, when the contract breaches 24,500, revise the stop-loss to 24,200.

Since a breakout of 24,500 can lift the contract to 25,250, revise the target up from 24,800 as recommended last week to 25,250.

Participants who bought 24200-call (December) instead of futures can retain the trade. Exit the option at the prevailing premium when the futures contract hits 25,250.

Bank Nifty

Bank Nifty futures (December) (52,364) opened last week with a gap-up. However, like in Nifty futures, the price movement through the week was largely sideways.

Bulls have certain developments in their favour. The premium of Bank Nifty futures over the spot index has widened and the cumulative OI has dropped well over the last week, indicating covering of short positions.

Yet, these are not enough for Bank Nifty futures to establish a fresh leg of rally as it is trading below the trend-defining level of 53,000.

Notably, since early October, the contract was, for most of the time, oscillating between 51,500 and 53,000. Briefly, it slipped below 51,500 a couple of weeks ago, but Bank Nifty futures has now come back in to this price band.

As long as the contract stays within the 51,500-53,000 range, the path of the next leg of trend will remain uncertain.

A breakout of 53,000 can lift Bank Nifty futures to 55,000. On the other hand, if it slips below 51,500, it can fall to 50,400, a support. Subsequent support is at 50,000.

Strategy: Traders can stay on the fence. Buy Bank Nifty December futures with a stop-loss at 52,000 if the breaks out of 53,000. Book profits at 55,000. One can capitalise on the potential up-move by buying a call option instead of futures. We suggest 53000-call of December expiry.

At a glance
Short covering seen in index futures
Nifty options show a bullish inclination
Fresh longs can be initiated on a breakout

Published on November 30, 2024