Get ready for higher volatility in April series, OI indicates Nifty at 21,000-23,000 range

April Options OI indicates Nifty may trade in 21,000-23,000 range

With the country going to polls from April 19 and the fourth-quarter earnings season coinciding, the Nifty is expected to see heavy volatility in trade in the current series. The level of 22,000 on the downside and 22,500 on the upside will be the two key levels to watch out for in the week beginning April 1.

Lower March rollovers signal caution

The Nifty rose 1.57 percent during the March series expiry. The Nifty futures rollover stood at 69.77 percent, which is lower compared to the last month's expiry rollover of 79.31 percent and its three-month average of 76.65 percent. Rollover is a process of carry forwarding an existing position from one month to another month. While a high rollover indicates a strong sentiment, lower- than-average rollovers call for cautiousness.

Lower OI & higher CoC indicate short0covering 

The Nifty will start the April series with an open interest (OI) of 1.22 crore shares compared to an OI of 1.40 crore shares at the beginning of the March series. The benchmark saw a lower rollover with a higher cost of carry (CoC) (+0.62 percent) and a fall in open interest, compared to its previous month, indicating covering of short positions in the March series.

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Ashwin Ramani

Derivatives Analyst|SAMCO Securities

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Fallen India VIX levels to be in focus

Volatility has cooled off since the start of March series expiry. The India VIX, known as the fear indicator, took multiple resistance, about four times around the 16.5 levels in the first two months of 2024. Volatility fell nearly 17 percent in the March series, which gave comfort to the bulls. The VIX closed at 12.83 on the last day of March series.

FPIs to surprise markets in April series

The foreign portfolio investors' (FPIs) long-short ratio stood at 31.34 percent on the last day of the March series. The FPI activity in the index futures largely remained subdued throughout the March series. The activity seemed to pick up pace in the first half of the series with the long-short ratio moving from 34.84 percent on March 1 until 42.89 percent on March 12, but fizzled out quickly to end up at 31.34 percent on the penultimate day of the March expiry series. The FPIs made a strong comeback on the last day of the March series with the ratio moving from 31.34 percent and closing at 44.83 percent.

Bulls may come back riding on pre-poll rally in Nifty

The Put-Call Ratio (PCR), a sentiment indicator, started with 1.33 on the first day of March series and closed at 1.01 on the last day of the series. Call writers (bears) overpowered Put writers (bulls) throughout the March series. However, with the momentum picking up in the Nifty, the Put writers (bulls) can very well make a comeback.

April Options OI indicates Nifty may trade in 21,000-23,000 range

On the Options front, in the April monthly expiry, the 21,000 strike Put option has highest open interest with 25,65,950 contracts, followed by the 22,000 strike Put option with 25,51,000 contracts. The strike prices with maximum put open interest are the support levels.

While on the Call side, the 23,000 Call has highest open interest with 24,76,050 contracts, followed by the 22,500 Call strike with 24,09,550 contracts. The strike prices with maximum call open interest are the resistance levels.

The Nifty moved up from 21,983 on February 29 until 22,526 on March 7 before strong profit-booking dragged the index down until 21,710 on March 20. The Nifty made a strong comeback towards the last leg of the March series closing at 22,326 on March 28. Market activity during the last week of March was marked by considerable volatility primarily because of the rebalancing of indices.

The Nifty has given a higher close (above previous week’s high of 22,181) on the weekly chart. It seemed Nifty might come under selling pressure having closed below the 50-day exponential moving average (DEMA) consecutively on March 19 and 20, but the index held on to this level and moved up sharply.

If Call writers (bears) exit from the 22,500 strike, we may see Nifty scaling a new high in the April series.

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