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Use put butterfly spread strategy in Nifty this week, says Shubham Agarwal

The Nifty is unable to surpass the 18,400 levels and slips towards 17,000. Further breakdown below 17,000 will take it to 16,700—16,500.

November 29, 2021 / 07:41 AM IST

Shubham Agarwal

A bearish momentum continued to rule the markets as the Nifty witnessed two consecutive selling pressure from expiries traded in the broader range of 18,400-17,000.

The Nifty is unable to surpass the 18,400 levels and slips towards 17,000. Further breakdown below 17,000 will take it to 16,700—16,500. The index has witnessed long unwinding through the week.

Bank Nifty shed more than 5 percent last week and closed around 36,150, after trading between 38,200 and 36,000. On the OI (open interest) front, short build-up was seen in Bank Nifty.

Further diving into the Nifty upcoming weekly expiry, Call writers showed aggressions by building more positions, compared to Put writers.

Close

Nifty immediate and vital support stands at the 17,000 levels with 34L, followed by 16,500 levels with 22L shares. On the upper side, immediate resistance level is at 17,300 where nearly 46L shares added followed 17500 with addition of 56L shares.

Looking at the Bank Nifty upcoming weekly expiry data. On the upper side, immediate resistance stands at 37,000 (17L shares), followed by 37,500 (15L shares). On the downside, 36,000 (10L shares) stands as the immediate support level and followed by 35,000 (10L shares) as the vital support level.

India VIX, fear gauge, increased drastically by 42 percent from 14.85 to 21.17 over the week. India VIX is trading near the lowest level of pre-covid crash. Any uptick in India VIX can push the downward momentum in the Nifty.

Looking at the sentimental indicator, Nifty OI PCR for the week has decreased from 0.883 to 0.727. Bank Nifty OIPCR over the week decreased from 0.624 to 0.573 from the last Friday.

Overall data indicates more of call writers over put writers in the Nifty.

Moving further to the weekly contribution of sectors to Nifty. Most of the sectoral indices have contributed negatively such as private banks, NBFCs, and IT that have collectively contributed more than 500 in the Nifty’s 857.16 points loss. Pharma collectively contributed 22 points on the positive side.

Monthly Derivative Rollover data shows that the Nifty rollover stands at 82.09 percent, while the Bank Nifty rollover stands at 83.33 percent. Nestle India having the highest stock-wise rollover of 99.09 percent, followed by Page Industries and JSW Steel rollover at 99.08 percent and 99.84 percent, respectively.

Metropolis witnessed lowest rollover of 74.75 percent, followed by Vedanta and GAIL rollover at 77.15 percent and 77.50 percent, respectively.

Looking towards the top gainer and loser stocks of the month in the F&O segment, Apollo Hospitals topped with over 33.5 percent gain, followed by Escorts at 21.20 percent and ZEE Ltd at 13.40 percent. IndusInd Bank has lost over 21.0 percent, PVR 20.20 percent and Jindal Steel 17.40 percent over the expiry.

Considering the bearish momentum, the upcoming week can be approached with a low-risk strategy like Modified Put Butterfly in the Nifty.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Shubham Agarwal is a CEO & Head of Research at Quantsapp Pvt. Ltd. He has been into many major kinds of market research and has been a programmer himself in Tens of programming languages. Earlier to the current position, Shubham has served for Motilal Oswal as Head of Quantitative, Technical & Derivatives Research and as a Technical Analyst at JM Financial.
first published: Nov 29, 2021 07:41 am
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