F&O Watch: Lower volatility still supports Nifty’s bullish undertone

By Chandan Taparia

The Nifty50 index closed flat with a negative bias on Wednesday as it ended the winning streak of last four sessions. It formed a small Bearish Candle, but continued to form higher lows for the fifth consecutive session. Now, if it negates the formation of higher lows, only then a small decline could be seen. But major trend of the market may remain intact till the Nifty50 holds above the previous swing high of 9,532.

Now, the index has to hold above 9,635 and 9,650 levels to witness an upward move towards 9,700 and 9,750 levels, while holding below 9,580 may drag it towards 9,550 and 9,532 levels.

On the options front, maximum Put open interest stood at strike price 9,400 followed by strike price 9,500 while maximum Call open interest was at 9,700, followed by strike price 9,600. Fresh Put writing was seen at strike prices 9,400, 9,500, 9,600 and 9,700 while Call writing was seen at 9,600, 9,650, 9,700, 9,800 and 10,000 levels. Option writing is taking place at all the at-the-money to out-of-money Call and Put options, which is keeping the market in a small trading range.

The Nifty50 remained in a small trading range and stock-specific action was seen in the market. India VIX remained flat at 11.76. Lower volatility is supporting the overall bullish undertone of the market.

The Bank Nifty outperformed the Nifty50 index, as it moved up by 0.50 per cent compared with a 0.03 per cent loss in the Nifty50. The index made a new record high of 23,469 and saw the highest daily close at 23,400. It has major support at 23,100 and then 22,978 levels, while on the upside, hurdles are seen at 23,500 and then 23,800 levels.

Long buildup was seen on the counters of ICICI Bank, Grasim, GAIL, Divi’s Lab, M&M, M&M Finance, LIC Housing Finance, McDowell and Indiabulls Housing Finance while shorts got added on the counters of REC, Bank of India, Canara Bank, Bharti Infratel and NMDC.

(Chandan Taparia is Technical & Derivative Analyst at Motilal Oswal Securities. Investors are advised to consult financial advisers before taking an investment calls based on these observations)