Nifty 50 (21,457) and Bank Nifty (48,144) experienced a 2.3 per cent and 1.9 per cent upswing, respectively, in the previous week. The prevailing sentiment is bullish, with a considerable likelihood of additional appreciation. In this analysis, we examine the derivatives data to gauge the overall positioning of participants.

Nifty 50

The Nifty futures for December concluded the week at 21,557, reflecting a 2.3 per cent increase, notably concentrated in the final two sessions of the week. Despite the weekly gain, the cumulative Open Interest (OI) surged, reaching 163.3 lakh contracts on December 15, compared with 133.2 lakh contracts on December 8. The simultaneous rise in price and OI suggests a significant long build-up.

Examining the option chain for weekly expiry, notable OI concentrations are observed in the 21200- and 21300-strike put options, indicating potential support levels. Conversely, the 21500- and 22000-call options boast the highest OI among calls, suggesting potential barriers.

The chart indicates a fresh breakout in Nifty futures, heightening the probability of a continued rally. The immediate resistance lies in the price band of 21,800-22,000 from the current level.

Given the bullish outlook, traders may consider long positions in Nifty futures. Alternatively, for reduced margin obligation and defined risk, buying at-the-money (ATM) monthly call options can serve as an alternative to futures.

Derivative market
Nifty futures has seen considerable long build-up
Bank Nifty futures too see fresh long additions
Options chain denotes bullishness on both indices
Bank Nifty

Last week, Bank Nifty futures for December expiration surged by 1.6 per cent, closing at 48,271 on Friday. The notable recovery in the latter half of Friday, following an initial dip, underscores the resilience of the bullish sentiment.

In support of the bullish outlook, the cumulative Open Interest (OI) for Bank Nifty futures expanded to 26.1 lakh contracts on December 15, up from 23.9 lakh contracts on December 8. The simultaneous increase in price and OI signifies a substantial long build-up.

Positive indications are further corroborated by the options data for Bank Nifty. The Put-Call Ratio (PCR) for both weekly and monthly options registered at 1.1 on Friday, denoting a higher proportion of put option selling than call options — a positive signal when the ratio exceeds 1.

Within the range of 47,500-48,000, there is a concentration of OIs, suggesting significant support in this region. Conversely, the 48500 and 49000-call options hold the highest OI among calls, serving as likely barriers.

The bullish trajectory on the Bank Nifty futures chart reflects robust upward momentum. Consequently, participants may consider initiating fresh long positions. Depending on one’s risk tolerance, opting for long positions in Bank Nifty futures or at-the-money (ATM) monthly expiry call options are the alternatives.