Bullish momentum may continue in Jan series with resistance at 22,000: Ashwin Ramani

INDIAVI rose 19.31% in the December series and closed at 15.14.

The Nifty rallied 8.17 percent during the December expiry. The Nifty Futures rollover stood at 79.54 percent, compared to 73.06 percent last month and its three/six/nine months average of 78.64 percent,79.07 percent and 76.30 percent, respectively.

Rollover is a process of carry-forwarding an existing position from one month to another month. A high rollover indicates a strong sentiment, while a lower rollover is usually considered a sign of weak sentiment.

The Nifty will start the January series with an open interest of 1.38 crore shares compared to an OI of 1.07 crore shares at the beginning of the December series. The index saw a higher rollover with a higher cost of carry (+0.68 percent) and a rise in open interest, compared to its previous month, indicating buildup of fresh long positions in December series.

INDIAVIX, known as the fear indicator, rose 19.31 percent in the December series and closed at 15.14. The India VIX is used by the traders to assess mood of the market. A higher VIX indicates greater market instability while a lower VIX suggest increased market confidence.

The long-short ratio for Foreign Portfolio Investors (FPIs) rose from 35.75 percent on November 30 to 69.55 percent on December 28, as the FPIs built long positions in Index Futures.

The FPIs have a great influence on the Indian markets, and it is important to keep a track of their activity in Indian markets. FPIs covered their short positions in Index futures on the last day of the December series and that suggests that the ongoing strong bullish momentum is likely to continue as we head to the January series.

The Put-Call ratio, a sentiment indicator, too, rose sharply from 1.19 on November 30, making a high of 1.40 on December 27 before closing at 1.21 on the last day of the December series expiry, indicating put writers’ dominance. A higher put-call ratio indicates that the markets are overbought, while a lower put-call ratio indicates that the market is in an oversold territory. The put writers (bulls) overpowered the call writers (bears) throughout the December series.

On the Options front, in the January monthly expiry, the 21,000 Strike put option has highest open interest with 37,66,700 contracts followed by the 20,500 Strike put option with 34,52,650 contracts. The Strike prices with maximum put open interest are the support levels. While on the call side, the 22,000 call has highest open interest with 23,39,100 contracts followed by the 21,500 Call strike with 15,27,800 contracts. The Strike prices with maximum call open interest are the resistance levels.

The Nifty had a stellar run in the December series expiry rising a whopping 8.17 percent. This by far was the best month for the index in 2023, the previous best being the month of November where it gained 5.52 percent. The Nifty has gained 20.29 percent for 2023 (December 30, 2022 to November 28, 2023).

The Nifty has been moving in a higher-high-higher-low formation since last nine weeks. It faced strong resistance around the 21,000 levels first on December 12 and then around the 21,600 levels on December 20.

The selling pressure was short-lived on both the occasions and the Nifty bounced back sharply. The bulls remained unfazed, exhibiting no signs of discomfort, even as the India VIX surged 19.31 percent during the December expiry.

The Nifty is likely to move towards the 22,000 levels, unless there is a consecutive lower close on the daily chart accompanied by robust call writing (strong resistance) at higher levels. The level of 21,500, which acted as a strong resistance for Nifty in the December month, is likely to act as a support in the upcoming January series.