The Nifty 50 (18,513) and the Nifty Bank (42,984) rallied over the past week and made higher highs, indicating a bullish bias. Both the indices gained 1.2 per cent each. The said, while the charts hint at a rally from here in both the indices, the derivatives data of these indices show that the Nifty 50 is better placed at this juncture and could outperform the Nifty Bank this week.
Nifty 50: There was a significant long build-up until Thursday as the cumulative Open Interest (OI) of Nifty futures shot up to nearly 165 lakh contracts compared with 137 lakh contracts by the end of the preceding week. However, it tumbled to 125 lakh contracts on Friday. Nevertheless, this is not a bearish indication, the bulls too seem to have liquidated their position. The Put Call Ratio (PCR) of Nifty’s weekly options expiring on December 1 stands at 1.03 showing almost the same level of writing of call and put options. Thus, derivatives data fail to give us a clear indication.
Nifty Bank: Similar to Nifty 50, the cumulative OI of Nifty Bank futures increased to 37.5 lakh contracts on Thursday as against 30.6 lakh contracts by the end of the preceding week. It dropped to 31.5 lakh contracts on Friday showing long unwinding. The PCR at 0.80 shows some bearish bias. Thus, Nifty Bank might underperform Nifty 50 this week.