Quantitative data set-up: 14,350 key for bulls to take Nifty back to 14,600

Options data suggests a wider trading range in between 14,000 and 14,800, while 14,300-14,600 will be the immediate trading range.

January 17, 2021 / 08:57 AM IST

Greed and Fear Indicator: Volatility spikes above 24 levels (VIX CMP – 24.01)

India VIX was up by 16.32 percent from 20.64 to 24.01 levels week-on-week.  Volatility spiked this week, causing some pause in the positive momentum. It needs to cool down below 20 for the bulls to take control.

CBOE VIX: CBOE VIX was up by 12.89 percent from 21.56 to 24.34 levels. Volatility rose throughout the week and needs to cool off.

FIIs continue infusing money

FIIs were net buyers for the week and bought Rs 7,637 crore worth of shares, while DIIs had an offsetting position and sold securities worth Rs 7,445 crore. The Long Short Ratio ranged from 67.41 percent to 78.73 percent to close the week at the lower band. On the FIIs derivatives front, there was long liquidation in index futures and short build up in stock futures.

Close

Gold below Rs 49,000 (MCX CMP–Rs 48,745)

Gold was down by 0.59 percent on the weekly scale and saw a rangebound trade during the week. The metal marked its second consecutive week of losses and continued to trade below its 100-DMA on the daily frame. Prices dropped as the result of the increasing US bond yields and a shift in asset class as investors felt the opportunity cost of holding the precious metal. After breaking out earlier in the month, gold has reversed course and is poised to test support.

Among other precious metals, silver was marginally up by 0.67 percent during the week.

Options Data: Nifty wider trading range between 14,000 and 14,800 (Nifty CMP – 14,433, Bank Nifty CMP – 32,246)

The Nifty futures closed the week with gains of 0.61 percent, with a reduction in futures Open Interest (OI) by 1.56 percent on a weekly basis, indicating that shorts are being covered. During the week, Put Call Ratio (PCR) based on Open Interest of the Nifty moved in between 1.19 and 1.80 levels and closed the week at the lower band.

On the options front, maximum Put open interest is at 14,000 followed by 13,500 strike while maximum Call open interest is at 15,000 followed by 14,500 strike. Call writing is at 14,500 then 14,600 strike while Put writing is at 13,500 and unwinding at 13,700 strike. Options data suggests a wider trading range between 14,000 and 14,800 and an immediate trading range of 14,300-14,600.

The Bank Nifty futures closed the week with gains of 0.44 percent with a reduction in Open interest by 11.29 percent on a weekly basis, which suggests shorts are being covered in the banking index. Put Call Ratio based on Open Interest of the Bank Nifty remained in between 0.87 and 1.04 and it closed near its lower band. Implied volatility (IV) of the banking index increased to 26.6 levels as the week concluded. For weekly Bank Nifty, Maximum Put open interest is at 31,000, while maximum Call open interest is at 35,500. We have seen Call writing in 35,500 and 32,500 while Put writing is witnessed at 30,000 with unwinding at 29,000 strike.

The Nifty financial services index, which was made available for trading in the F&O segment earlier in the week, reflected good open interest built up in the week by 28.05 percent (due to lower base) with a marginal decrease in futures price by 1.04 percent. As open interest inventory has just started, we will get a proper sense of the trading position in teh new index after a few weeks.

Rupee snaps three-day winning streak (USD/INR CMP – 73.12)

The USD-INR currency pair was down 0.28 percent and after a positive opening, fell throughout the week. It recovered marginally as the week concluded. Selling pressure could be seen in the Indian market, which weighed the rupee down. Rising US bond yields acted as a catalyst.

Crude oil (WTI, MCX CMP – Rs 3,830 per barrel)

Oil was up by 2.55 percent week-on-week basis and continued its upward trend in a broader time frame. After touching a 47-week high at Rs 3,976, it fell sharply as the week concluded. This fall was due to a new coronavirus outbreak in some parts of China and over the possibility of a lockdown in the world’s largest crude importer.

DJIA: US indices in the red (DJIA CMP – 30,814)

Global indices ended the week in the red and the Dow Jones was down by 0.91 percent for the week. Profit-booking decline could be seen and the Wall Street extended its losses for the second day followed by lower-than-expected results of heavyweight financial institutions accompanied by a mix of data on the coronavirus.

Moving forward, the Nifty has to hold near 14,350 zone to witness a bulls' grip to take it towards 14,600 then 14,750, while on the downside, major support exists at 14,300 and 14,200 levels. The Bank Nifty has to hold near to 32,000 to witness an upmove towards 32,500 and 32,750, while on the downside, support exists at 31,750 and 31,500.

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.
Chandan Taparia is the Vice President and Analyst-Derivatives at Motilal Oswal Financial Services Limited.
first published: Jan 17, 2021 08:57 am

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