F&O Manual | India VIX cools off; Nifty sees smart rebound

NSE Nifty 50 gained over 500 points on June 5, climbing above 22,400.

Indian benchmark equity indices jumped 2 percent in the late morning on 4 June, after a choppy opening session. NSE Nifty 50 gained over 500 points, climbing above 22,400. Banking index Bank Nifty gained more than 900 points to trade well above 47,800.

Experts said the technical evidence continues to suggest that the markets are likely to remain under pressure in the near term. At present, the Nifty has support around 21,500 points, followed by the 200-Day Exponential Moving Average (DEMA) at the 21,250 level.

In the previous session, the long bets set for a highly anticipated BJP win in the general election were caught off guard, leading to an initial round of liquidation. Foreign Institutional Investors (FII) sold Rs 4,018 crores of OI in index futures and Rs 1,375 crores in options.

India Vix:

Volatility index India Vix witnessed a sharp upside rally in Tuesday’s trading session, marking a high of 31.70 levels, the highest level since February 2022. In today's session, it has seen a sharp post-event decline of 28 percent, down to 19.

Nifty options data suggests heavy call writing at 22,200, 22,300, and 22,500, forming strong resistance. Weekly OIPCR at 0.51 implies bearish bets mounting, with call writers building significant positions in 22,000 Calls and unwinding visible in 22,000 PE and 21,500 PE.

"At present, the Nifty has found support around the 200-Day Exponential Moving Average, which is currently placed at 21,250. Support for the Nifty is now seen in the 21,750-800 zone, and then at 21,250-300. On the higher side, immediate resistance is at 22,300, and the next crucial resistance is at 22,500," said Tejas Shah, VP Technical Research at JM Financial.

On the derivative front, June futures have cracked by 6.12 percent, and the Open Interest rising by 1.17 percent, indicating an overall short buildup.

The immediate support for the index is in the zone of 21,700-21,650. “Any sustainable move below the level of 21,650 will lead to further selling pressure in the index. In that case, it is likely to test the level of 21,250, followed by 21,000 in the short term,” said Sudeep Shah, DVP, and Head of Technical Research at SBI Securities. On the upside, the resistance has shifted lower to the zone of 22,200-22,250 levels, above which short covering up to 22,450-22,600 could be likely, he said.

Bank Nifty

Major call option OI is set at 50,000, 51,000, 52,000, and 53,000. In Bank Nifty put options, the highest OI across strikes at 45,000 is the writing base. ATM 47,000 options premiums are pricing in for a 1,100 point move on the weekly expiry day. "If prices hold ground in the first half-hour of trade, expect a recovery. In case it doesn’t, watch the support areas on dips for potential intraday bounce," said Akshay Bhagwat, Vice President Derivative Research at JM Financial.

Among individual stocks, a long build-up is seen in FMCG stocks like Dabur, HUL, Nestle, and Marico. Short build-up is being witnessed in PSU stocks like HAL and BEL.

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