F&O: Option positions show bulls holding a tight grip

By Chandan Taparia

The Nifty50 managed to hold its support in the 11,650-11,666 zone on Friday and rallied around 200 points to head towards 11,850 level. It managed to record the highest daily close after making a fresh lifetime high of 12,040 on the results day. The index formed an Inside Bar on the daily chart as it traded inside the wider trading range of results day while a bullish gap-up candle on weekly scale indicated that the bulls are holding a tight grip on the market.

Now Nifty has to hold above 11,750 to extend its move towards the 12,000-12,040 zone while support is seen in the 11,666-11,650 zone.

On the options front, maximum Put open interest was at 11,000 followed by 11,500 levels, while maximum Call OI was at 12,500 followed by 12,000. There was Put writing at 11,700 while minor Call writing was seen at 12,100 and then 12,200 levels. The option band signified a trading range between 11,600 and 12,100 levels.

India VIX fell sharply by 15.12 per cent to 16.46 level. The volatility index corrected 41 per cent last week from 28.08 to 16.46 level. During the week, it formed a 44-month high of 30.18 but fell drastically to 16.45 level on Thursday after the election outcome.

A decline in the VIX suggests short-term stability and formation of a higher base going forward.

Bank Nifty has been making higher lows for last six sessions and closed the week with the decent gain of around 6%. It made a new lifetime high of 31,705 on the election result day and registered the highest daily and weekly close above 31,200. There was buying interest in most private and PSU banks and a follow-up buying could lead them to a fresh breakout territory.

Now, Bank Nifty has to hold above 30,500 to extend its move towards the recent high of 31,705 and then a fresh rally towards 32,000 and 32,250 levels, while major support exists at 30,250 level, which has provided major support for whole of last week.

Nifty futures closed positive at 11, 865 with a gain of 1.48 per cent. Long buildup was seen in Manappuram Finance, BEML, BEL and CEAT while shorts were seen in Bata India, Sun TV, Just Dial and Torrent Pharma.

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