Nifty 50 (19,638) and Bank Nifty (44,585) ended last week marginally lower after facing significant selling pressure in the preceding week. While Nifty 50 lost 0.2 per cent, Bank Nifty was down 0.1 per cent over the last week. Below is an analysis of the futures and options (F&O) data of both indices.
The October Nifty futures declined 0.6 per cent last week to end at 19,709 on Friday. While the futures declined, the cumulative Open Interest (OI) of Nifty futures on NSE saw a drop – it stood at 102.2 lakh contracts on September 29 versus 118.6 lakh contracts on September 22. A simultaneous drop in price and OI indicates long unwinding.
With respect to options, the Put Call Ratio (PCR) of weekly options was at 0.8 by the end of last week, which shows relatively more call option writing compared with put options, giving a bearish bias. But the PCR of monthly options stood at 1.4 which is bullish. Hence, the option data show that Nifty futures could stay flat or fall slightly this week and could recover towards the end of the month.
As per option chain, the nearest notable support and resistance is at 19,500 and 19,800 respectively as 19500-put and 19800-call have significant outstanding OI.
Although the above factors show bearish bias, the price action of Nifty futures indicate that the contract might consolidate this week with a negative bias. Traders can wait for more clues before initiating fresh positions.
The October expiry Bank Nifty futures posted a loss of 0.3 per cent last week as it ended at 44,848 on Friday. Like in Nifty futures, the cumulative OI of Bank Nifty futures, too, dropped over the past week – it stood at 23 lakh contracts on September 29 as against 25.3 lakh contracts on September 22. Hence, Bank Nifty futures too witnessed long unwinding.
Coming to options, the PCR of both month and weekly options was at nearly 1 by the end of last week. Thus, the options data does not give a definite bias for Bank Nifty futures.
The chart shows that Bank Nifty futures has its nearest support and resistance at 44,500 and 45,200 respectively. The contract might remain within these two levels in the coming week as well.
As per the option chain, the 44500-put and 45000-call have been sold significantly and so, these 44,500 and 45,000 are considerable support and resistance respectively. This aligns well with the levels indicated by the chart.
Until either of 44,500 or 45,200 is breached decisively, the next leg of trend will remain uncertain. Until then, traders can stay out.