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Last Updated : Sep 27, 2020 04:03 PM IST | Source: Moneycontrol.com

Quantitative data set-up: Options data suggests Nifty may trade in 10,800-11,300 range

The Nifty needs to hold above 11,000 to witness a bounce towards 11,111 then 11,250 zones.

Chandan Taparia

Greed and Fear Indicator: Volatility needs to further cool down (VIX CMP – 20.67)

India VIX moved up by 3.14 percent from 20.04 to 20.67 and has negated its lower highs lower bottoms of the last three weeks. VIX recently spiked to 23.81, which is giving a volatile move with profit decline in the market. It has to cool down to 20-18 zones to get the bulls' grip.

CBOE VIX: CBOE VIX was up by 2.13 percent from 25.83 to 26.38 levels. It also negated its lower highs lower bottoms on the weekly frame, which is giving upper hand to the bears. The jump in the CBOE VIX paused the positive momentum in the US indices, which affected the Indian equity market.

Close

Fund flow: FIIs continue selling

In the cash segment, foreign institutional investors (FIIs) continued their week-long selling streak and were heavy sellers to the tune of Rs 10,491 crore. Domestic institutional investors had an offsetting position and were net buyers worth Rs 4,249 crore. The Long Short Ratio ranged from 44.3 percent to 55.7 percent in the week to close near 54 percent. On the FIIs derivatives front, there was long liquidation in index futures and short-covering in stock futures. FIIs turn cautious amid volatility in the global market.

Safe haven: Gold's fading glitter (Gold, MCX CMP– Rs 49,625 per 10 grams)

Gold was down by 4.13 percent and gave a narrow range breakdown on week-on-week basis. It negated its lower top-lower bottom formation on September 24. It broke its key 50 DMA. It remains under pressure and needs to hold above 49,500 to prevent falling in the bear trap.

Among other precious metals, silver broke and was down by 13 percent this week, the worst week in the month.

Option Data: Nifty immediate range 10,800 to 11,300 (Nifty CMP–11,050, Bank Nifty CMP–20,982)

Nifty futures closed the week with a loss of 1.9 percent with a reduction in futures Open Interest (OI) by 24.16 percent on a weekly basis, which indicates long liquidation (OI is also decreased because of September expiry). During the week, Put Call Ratio (PCR) based on Open Interest of the Nifty moved in between 1.03 and 1.31 and closed in the higher band. Since it is the beginning of a new series, options data is scattered at various strikes. Maximum Put open interest is at 10,500 followed by 10,000 strike, while maximum Call open interest is at 11,500 followed by 12,000 strike. We have seen marginal Call writing in 11,300 and 11,600 strike while Put writing is at 10,500 then 10,600 strike. Option data suggests a wider trading range in between 10,500 to 11,500 zones while an immediate range shifts at 10,800 to 11,300 zones.

The Bank Nifty futures closed the week with a loss of 1.92 percent with a reduction in Open interest by 14.1 percent on a weekly basis, which again suggests long liquidation.

Put Call Ratio based on Open Interest of the Bank Nifty remained in between 0.59 and 0.84 and it closed the week in the upper band. IV of the banking index was at 35 levels as the week concluded. Maximum Put open interest is at 20,500 followed by 19,000, while maximum Call open interest is at 21,500 followed by 23,000. We have seen Call writing in 23,000 while call unwinding at 23,500. Put writing is witnessed at 20,000 and 20,500 strikes.

Indian currency: Rupee under pressure (USD/INR CMP–73.67)

The USD/INR pair was up by 0.18 percent on a week-on-week basis but made wide swings during the week. It continued its higher lows formation on the weekly frame. The wave of uncertainty brought by the possibility of another round of lockdowns due to the increasing number of coronavirus cases hit the rupee to its month low levels on September 23. The next day the Indian currency recovered to close near 73.67 levels.

Crude Oil: Oil against gravity (Crude Oil WTI, MCX CMP – Rs 2,968 per barrel)

Crude was down by 0.84 percent on week-on-week basis. It is taking support at its 100-DMA but weakness continues, as it is trading below its 50 and 200-DMA. RSI is giving mixed signals and demand concerns persist.

DJIA: Pause in the positive momentum (DJIA CMP–27,173)

The Dow Jones continued its southward movement for the fourth straight week and was down by 1.74 percent on a week-on-week basis. Investor sentiments has been shaken by the delay in vaccine The selloff in tech stocks saw US markets close in the red but September 25 saw some recovery and buying on dips. Asian markets, too, felt the heat in line with the global selloff.

Moving forward, teh Nifty needs to hold above 11,000 to witness a bounce towards 11,111 then 11,250 zones while on the downside, supports are seen at 10,950 then 10,800 zones. The Bank Nifty needs to hold above 21,000 zones for a bounce towards 21,500 then 21,750 zones while on the downside, support is at 20,750 then 20,400 zones.

(Chandan Taparia is the Vice President – Research Derivatives & Technical Analyst at Motilal Oswal Financial Services.)

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.
First Published on Sep 27, 2020 04:03 pm
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