Nifty 50 (19,795) and Bank Nifty (43,769) appreciated 0.3 per cent and 0.4 per cent respectively last week. Nevertheless, the price action through the week was largely flat. Here, we take a look at the futures and options (F&O) data to get an insight on how broader expectations of derivative participants are.

Nifty 50

The November Nifty futures closed at 19,827 on November 24 versus 19,807 on November 17. Even as the rise was marginal, the cumulative Open interest (OI) increased. It rose to 130.6 lakh contracts from 125.4 lakh contracts during the corresponding period. Since the futures only saw a marginal gain, we cannot assume a strong long build-up.

The Put Call Ratio (PCR) of November expiry options stood at 0.85 on Friday. A ratio less than one shows relatively higher call option selling compared with put options. This is a bearish indication.

Combining the indications of futures and options together, there is no clear indication about the next swing in price. In line with this, the chart of Nifty futures shows that it has been oscillating between 19,730 and 19,900 recently. The direction, in which the contract breaks the range, is the key.

According to the options chain of November expiry, 19,700 and 19,500 are the potential supports, as the put option with this strike have significant OI outstanding. Similarly, 20,000 and 20,100 are the notable resistance levels, as the call options of both the strikes have the highest OI.

Given the prevailing conditions, we suggest traders to refrain from initiating fresh positions. The direction of the breach of the 19,730-19,900 range will be the hint for the next leg of trend.

Derivatives summary
Futures witnessed weak long build-ups
Nifty options show slight bearish bias
Bank Nifty options indicate neutrality
Bank Nifty

The November expiry Bank Nifty futures produced a marginal gain of 0.2 per cent last week as it closed at 43,806 on Friday. The cumulative OI went up over the past week – it increased to 28.6 lakh contracts on November 24 versus 26.5 lakh contracts on November 17. Similar to Nifty futures, the long build-up here is not significant as Bank Nifty futures’ gain is only small.

The PCR of November expiry options was at 1 on Friday. So, the number of call and put options sold are nearly the same and so, there is no bias seen in option positioning. Hence, the F&O data failed to lend us any clue on the direction of the next price swing.

The chart, too, is flat, as Bank Nifty futures appears to consolidate between 43,400 and 44,000. Technically, one should wait for the contract to get out of the range to forecast the next move.

The option chain of November series shows that 43500-, 43600- and 43700-strike puts have considerable outstanding OI. Hence, the price band of 43,500-43,700 is a good support, as per options positioning. Similarly, 44,000 and 44,300 are possible resistance levels since the call options with these strike prices have the highest OI.

Since there is no clarity in trend, we recommend traders to stay out.

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