Futures & Option Data: Nifty wider trading range between 12,500 to 13,500 (Nifty CMP – 12,968, Bank Nifty CMP – 29,609)
Nifty futures closed the week with gains of 1.14 percent with a reduction in futures Open Interest (OI) by 8.22 percent on a weekly basis which indicates shorts are being covered and longs are being built as the index continues to cheer the bullish momentum. During the week, Put Call Ratio (PCR) based on Open Interest of Nifty moved in between 1.27 to 1.78 levels and closed the week near its lower band of 1.28 levels. Since it is the beginning of a new series, option data is scattered at different strikes. On option front, Maximum Put open interest was at 12,000 followed by 13,000 strike while maximum Call open interest was at 13,000 followed by 13,500 strike. Option data suggests a wider trading range between 12,500 to 13,500 levels.
Bank Nifty futures closed the week with gains of 1.44 percent with a reduction in Open interest by 16.12 percent on a weekly basis which suggests shorts are being covered in the banking index. Put Call Ratio based on Open Interest of Bank Nifty remained in between 0.84 to 1.36 and it closed the week at 0.94. IV of Banking index decreased to 28.7 levels as the week concluded. Maximum Put open interest was at 28,000 followed by 27,000, while maximum Call open interest was at 30,000 followed by 32,000. We have seen Call writing in 32,000 while Put writing is witnessed at 27,000 strike.
Greed and Fear Indicator: VIX needs to continue at lower zones for continued strength in the market (VIX CMP – 19.81)
India VIX was up by 1.02 percent from 19.61 to 19.81 levels. Volatility has cooled down and overall lower levels suggest that bulls are holding the grip and any decline could be bought in the market.
Sector wise breakup: Fund inflows and positive momentum in the market saw longs being built
Long built up was seen in the Automobile, Banking, Capital goods, Cement, Finance, FMCG, Infrastructure, Media, Metals, Oil & Gas, Pharma, Power and Realty sectors while Short covering in Fertiliser and Textile sectors Short built up in Technology and Telecom stocks.
Fund Flow: FIIs recorded the highest monthly buying in two decades and FIIs Long Short ratio tops to 40 months high
India has been grounded strongly for FIIs to park their investment as November month recorded the highest monthly buying in the cash segment by the FIIs in the last two decades. They bought worth Rs 65,317 crore as buying continued relentlessly in every session of the month barring Muhurat trading. During the week they were buyers worth Rs 19,066 crore. DIIs on the other hand had an offsetting position and sold worth Rs 48,339 crore in the month and Rs 15,675 crore during the week. The Long Short Ratio ranged from 64.12 percent to 82.06 percent in the week to close the week at it higher band near its 40 months high levels. On the FIIs derivatives front, there was short covering in index futures and short built up in stock futures.
Moving forward, Nifty has to continue to hold above 12,900 zone to witness an up move towards 13,150 then 13,250 levels while on the downside support exists at 12,800. Bank Nifty has to hold above 29,200 to witness an up move towards 30,000 then 30,300 levels while support is seen at 29,000 and 28,800.
(Chandan Taparia is the Vice President – Research Derivatives & Technical Analyst at Motilal Oswal Financial Services.)Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.