F&O Tracker: Nifty 50, Nifty Bank likely to remain range bound

Nifty 50 (17,624), by losing 1.1 per cent last week, underperformed Nifty Bank (42,118), which closed flat. In Nifty, most of the decline happened in the first half of the week where it was moving in a narrow range in the second half.

That said, the futures and options (F&O) data of both indices do not indicate a clear bias leaving the probability the same for moving in either direction. Below is an analysis of derivatives data.

Nifty 50

The April futures contract of Nifty 50 lost 1.3 per cent last week to end at 17,648. However, the cumulative Open Interest (OI) of Nifty futures on the NSE was largely unchanged on a weekly basis — it stood at 112.5 lakh contracts on April 21 compared with 113 lakh contracts on April 13. So, it was a weak decline, which means it can stop anytime.

However, the options data gives the index a bearish bias. The option chain of nearest weekly expiry shows that the Put Call Ratio (PCR) stands at 0.82 – meaning more call options were sold as against put options. This indicates a limited upside. Notably, the 17700-strike call, whose outstanding OI is over 3 lakh contracts, can act as a stiff resistance. On the other hand, put options with strike prices between 17,300 and 17,600 have considerable outstanding OI. These are potential supports.

Considering the above factors, there is a good chance for the index to stay sideways with a bearish bias. Therefore, one can implement strategies like bear call spread for this week.

What to expect

Nifty 50 might stay flat

Nifty Bank can see a minor decline

Opt for strategies with bearish inclination

Nifty Bank

The April Nifty Bank futures ended last week almost flat at 42,125 versus the preceding week’s close of 42,190. So, although the cumulative OI of Nifty Bank futures on the NSE increased to 29.9 lakh contracts on April 21 as against 27.5 lakh contracts on April 13, it does not have directional implication. If any, it could only be taken as a slight bearish signal.

With respect to options, the PCR of the nearest weekly expiry stands at 0.72, showing higher number of call options writing than puts. Thus, participants are not expecting a rally.

The 42000-strike call and put options have a significant amount of outstanding OI. Thus, there is a good chance for the contract to consolidate around this level till the current expiry. Apart from this, 42300- and 42500-strike calls have seen good numbers of writing, thus acting as a resistance.

Overall, the index could trade with a negative bias, but we do not expect a large movement on either side until the expiry of the current series. So, like in Nifty 50, traders can consider bear call spread in Nifty Bank as well.

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