The Nifty 50 (18,696) and the Nifty Bank (43,104) ended last week with a gain; the former appreciated 1 per cent, the latter was up 0.3 per cent. While the broader uptrend is intact, the derivatives data shows that there could be a decline this week.
Nifty 50: As the Nifty 50 went up, the cumulative Open Interest (OI) of its futures increased to 132 lakh contracts from 125 lakh contracts over the past week. This is an indication of a long build-up. However, there has been a significant amount of call writing. Consequently, the Put Call Ratio (PCR) of the current weekly expiry options stands at 0.70. Thus, the participants are not expecting the Nifty to rally, at least in the coming week.
Nifty Bank: Unlike in Nifty 50, the Nifty Bank, although it rallied, the cumulative OI of its futures dropped last week to 30.7 lakh contracts compared to 31.5 lakh contracts a week ago. While a price rally along with a drop in OI is considered as short covering, we cannot assume that the Nifty Bank is set to rally. Because the weekly option of Nifty Bank too shows more call writing than put writing — the PCR of weekly options stands at 0.70. So, there is a bearish bias.