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Nifty 50 (17,857) and Nifty Bank (41,559) closed the week flat. Both bears and bulls did not make much effort to take control as the intraweek movement too was largely quiet without much volatility. The volatility measure – India VIX – fell for the second straight week. This week too, we may not see much drama, unless there is some movement triggered by some events, as the derivatives data of both indices fail to show any definite bias. Here’s an analysis of the same.
Nifty 50
The February futures contract of Nifty 50 lost 0.2 per cent over the past week as it ended at 17,857. In the corresponding period, the outstanding cumulative Open Interest (OI) of Nifty futures on the NSE increased to nearly 118 lakh contracts on Friday versus 112 lakh contracts a week ago. Here, the contract has dropped along with increase in OI, typically an indication of short build-up. However, the price action has largely been flat, and the underlying index ended with no gain and no loss. Therefore, this may not be very significant.
For the nearest weekly expiry – February 16, the Put Call Ratio (PCR) stands at 0.88.. While this shows a relatively higher number of call selling, 17800-strike put option has significant outstanding OI, thus a potential support. On the other hand, 18000- and 18200-strike calls are being written for a considerable quantity. So, they are potential barriers.
Overall, the next leg of trend will depend on which direction the Nifty 50 breaks from the 17,800-18,000 price range.
Nifty Bank
The February futures of Nifty Bank did not see much movement with respect to price on a weekly basis as it ended at 41,636 versus previous week’s close of 41,638. Therefore, although the cumulative OI has increased to 26.4 lakh contracts from 25.8 lakh contracts over the last week, we cannot clearly make an interpretation as the price has not changed much.
The PCR of weekly options is at 0.84 showing more call writing similar to Nifty 50 options. But here, the 41500-strike of the nearest weekly expiry is the busiest as the call and put of this strike has the highest OI. Apart from this, 41000-strike put and 42000-strike call has a significant number of outstanding OI. Therefore, the Nifty Bank has its nearest support and resistance at 41,000 and 42,000 respectively, thus showing that it could remain range-bound like the benchmark index.
Overall, both Nifty 50 and Nifty Bank could stay sideways this week as well. Considering that these indices are facing a strong resistance and that the PCR shows relatively higher call writing, traders can opt to sell call options for until the end of the current expiry. But make sure to hedge especially when you sell options.
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