F&O Manual| Indices fall, volatility rises again; Nifty may face speed bumps on the way up to 22,800

At 10:16 hrs IST, the Sensex was down 215.23 points or 0.29 percent at 73,790.71, and the Nifty was down 36.70 points or 0.16 percent at 22,465.30

Benchmark indices Sensex and Nifty fell moderately on May 21, after having scaled key levels of 74,000 and 22,500 at the close of the previous session.

Derivatives data indicate that the Nifty is favourably positioned for an upward move towards 22,800, despite selling pressure at higher levels.

The immediate support levels for Nifty are now placed at 22,400 and 22,350. Analysts suggest buying on dips at these levels, with a stop-loss at 22,200 and a target range of 22,750 to 22,800.

At 09:29 hrs IST, the Sensex was down 111.54 points or 0.15 percent at 73,894.40, and the Nifty was down 22.50 points or 0.10 percent at 22,479.50. About 1389 shares advanced, 1651 shares declined, and 172 shares unchanged.

Bars in red indicate the change in open interest (OI) of call writers, while the green bars show the change in OI of put writers

Options data show heavy call writing from the 22,700 to 23,000 strikes. “For the 23 May expiry, the highest open interest stands at 23,000 CE (call option), followed by 22,500 CE,” said Avani Bhatt, Senior Vice President of Derivative Research at JM Financial.

On the put side, the highest open interest is at 22,400 PE (put option), followed by 22,000 PE. Over 1.4 lakh contracts are distributed across the 22,200, 22,300, and 22,500 put strikes as well.

“The OIPCR (Put-Call Ratio - Open Interest) for the 23rd May expiry is at 1.25, indicating a positive outlook,” said Bhatt.

Nifty is on track to gradually scale higher up to 22,750-22,800, Bhatt noted. “However, the upward move may not be linear. There will be bouts of selling from 22,500 in the range of 30 points, but every dip should be used as a buying opportunity,” she added.

Bank Nifty

On a week-on-week basis, May futures witnessed a minor open interest addition of 0.66 percent. For the 22 May expiry, the highest open interest stands at 48,500 CE, followed by 48,000 CE. On the put side, the highest open interest is at 48,000 PE, followed by 47,500 PE.

"The OIPCR for the 48,000 strike is above 1.21, hinting at a gradual support base firming up at this level. Bank Nifty is likely to experience a catch-up rally this week. Multiple hurdles are yet to be overcome, so the up-move is expected to be slow and gradual. However, the support base is strengthening around the 47,950-48,000 area," said Bhatt.

According to Bhatt, "The immediate resistance is at 48,300, above which momentum will pick up towards 48,600/48,900. On the downside, supports are at 47,740 and 47,400 for the week."

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