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For Nifty, deploy Modified Put Butterfly strategy, says Shubham Agarwal

Considering the bearish momentum, a low-risk strategy like Modified Put Butterfly will work the best for the Nifty this week

February 28, 2022 / 07:58 AM IST

After consolidating for over a month, the Nifty finally broke out from the 17,800—16,800 range in the week gone by. It ended the week 3.60 percent down at around 16,650.

The Nifty future during the week ranged from 17,350 to 16,230. On the open interest front (OI), the index saw long unwinding.

The Bank Nifty closed 3.11 percent lower at 36,400. The banking index future gyrated between 38,000 and 35,200 in the week ended February 25.

Overall, the Bank Nifty ended the week with a loss of around 1,100 points and witnessed a short buildup on the OI front.

Upcoming weekly expiry option writers are showing equal aggression from both sides. For the Nifty, immediate resistance is at 17,000 and vital resistance at 17,500, where nearly 29 lakh and 53 lakh shares have been added, respectively.

Close

On the lower side, immediate and vital support levels are at 16,500 and 16,000, where nearly 28 lakh and 37 lakh shares have been added, respectively.

The Bank Nifty weekly expiry data shows that on the upper side, the immediate resistance is at 37,000, where nearly 10 lakh shares have been added. Vital resistance is at 38,000, where nearly 13 lakh shares have been added.

On the downside, immediate and vital support is 36,000, where nearly 10 lakh shares have been added.

India VIX, a measure of expected volatility in the market, is still high. India VIX went up 20 percent from 22.16 to 26.74 during the week. Such spikes can create more fear in the market.

Looking at the sentiment indicator, Nifty OI PCR for the week decreased marginally from 1.063 to 1.022. Bank Nifty OIPCR dropped from 0.988 to 0.80. Overall data indicates strong tussle between option writers in the Nifty.

As far as weekly contributions go, most sectoral indices traded negative. PVTB, OIL and FMCG contributed the most to the Nifty’s loss of 600 points.

Nifty’s monthly rollover stands at 76 percent in the March series expiry, while Bank Nifty rollover is at 75.

Pidilite has the highest stock wise rollover of 98.62 percent followed by Mphasis and Shree Cements at 98.54 and 94.47 percent.

Escorts has the lowest rollover of 48.76 percent followed by PNB and Vedanta at 58.79 percent and 65.66 percent.

Let us take a look at the top gainer and loser of the week in the F&O segment. Crompton gained the most at 6.7 percent, followed by Abbott India at 6.3 percent and Dixon at 5.9 percent.

Indiabulls Housing lost over 19.7 percent, Indus Towers 18.8 percent and Rain Industries 12.4 percent over the week.

Considering the bearish momentum this week the Nifty can be approached with a low-risk strategy such as the Modified Put Butterfly.

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Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.



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Shubham Agarwal is a CEO & Head of Research at Quantsapp Pvt. Ltd. He has been into many major kinds of market research and has been a programmer himself in Tens of programming languages. Earlier to the current position, Shubham has served for Motilal Oswal as Head of Quantitative, Technical & Derivatives Research and as a Technical Analyst at JM Financial.
first published: Feb 28, 2022 07:58 am
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