The Nifty 50 (16,719) and the Nifty Bank (36,739) rallied last week and posted a gain of 4.2 and 5.9 per cent, respectively. Broadly, derivatives data indicate that the Nifty 50 could stay sideways whereas the Nifty Bank could see some rally as there is a good long build-up in futures.
Nifty 50: The cumulative open interest (OI) of Nifty 50 futures on the NSE dropped to 127.2 lakh contracts on Friday compared to 143.8 lakh contracts by the end of preceding week. But during this period, the price has rallied. So, it can be assumed that the rally is weak and there should be fresh build-up in OI on further rise in price to substantiate the bullishness. Although, the option chain indicates good amount of put writing, showing that option traders do not expect a fall from here until the July expiry which is on July 28. Option chain shows that 17000-strike call and 16500-strike put, with highest OI are potential resistance and support levels, respectively.
Nifty Bank: The cumulative OI of Nifty Bank futures on the NSE had increased to 29 lakh contracts by Friday versus 25.2 lakh contracts a week ago. Thus, the rally in Nifty Bank futures is accompanied by increasing OI, showing fresh long build-up. Also, options data shows a fair amount of put selling which means option traders are assuming that the Nifty Bank is less likely to fall from the current level until expiry. 37000-strike call and 36000-strike put have highest open interest which can be the resistance and support level, respectively.
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