F&O Manual | High volatility keeps Nifty choppy but sentiment seen upbeat above 22,800

India VIX, the volatility index is up around 5%.

Indian benchmark indices suffered from increased volatility on May 28 as the Nifty 50 swung between gains and losses through the session so far. While the benchmark index stuck close to the psychologically important 23,000 mark, analysts believe the momentum will remain positive as long as the Nifty holds above 22,800.

The 23,000-mark emerged as a battleground for the bulls and bears as options writers were most active at that strike price.

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 suggests strong call writing seen across 23,000 to 23,300 levels. On the other hand, put writers were mostly active across 22,800-23,000 strike prices. According to analysts at JM Financial, "Looks like price oscillation around the 23k mark is in the making, the range setup being 22,700-23,300."

Analysts at the brokerage believe the momentum in the market will remain positive as long as the Nifty trades above 22,800, whereas it will turn neutral if the index gets caught in the range of 22,600-22,750. On the downside, the analysts see momentum weakening only when the Nifty breaks below 22,550.

"Also, put writing is relatively aggressive than the call writing with 22,800 put strike also holding meaningful open interest. Hence, we expect the Nifty to hold itself above these levels and may move higher towards 23,500 on the back of further short covering ahead of election results," said ICICI Securities.

ICICI Securities: Considering the recent change in stance from FII’s we expect Bank Nifty to remain positive and move towards its lifetime highs near the 50,000 mark in the coming sessions. We can expect immediate support in Bank Nifty emerging from the 48,400 levels, above which bias should remain positive. We believe that sustainability above the 49,000 level may reignite short covering towards the monthly settlement.