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Nifty 50 (18,563) and Nifty Bank (43,989) inched up in the first half of last week. However, in the final two sessions, they witnessed a decline. Yet, for weekly basis, Nifty 50 and Nifty Bank posted a marginal gain of 0.2 and 0.1 per cent, respectively. Below is an analysis on futures and options (F&O) data.
Nifty 50
The Nifty 50 June futures closed flat at 18,632 compared with previous week’s close of 18,636. The cumulative Open Interest (OI) of Nifty futures rose to 112.1 lakh contracts on Friday as against 100.6 lakh contracts by the end of preceding week. But notably, most of the increase came on Thursday and Friday, when the price fell. Thus, there seems to have been a short build-up towards the end of last week.
The options data too show signs of bearishness. The Put Call Ratio (PCR) of the nearest weekly expiry stood at 0.62, showing significantly higher call writing versus put writing. Specifically, OI is concentrated between the strike 18,600 and 18,800. Thus, the options traders are not expecting a rally beyond these levels this week. However, the PCR of June monthly options, at 1.28, indicates more put writing, thus giving some hope for the bulls.
Overall, considering the above factors, Nifty 50 is likely to see a decline until the current week expiry — June 15 and then see a rally.
Traders can implement bearish strategies like bear call/put spread for this week. But those who plan to take longs and carry them beyond the current weekly expiry, can wait for a dip and then execute bullish strategies.
Nifty Bank
The Nifty Bank futures, June expiry, closed the week without much change – it ended the week at 44,118 versus preceding week’s close of 44,111. But the cumulative OI had increased to 27.2 lakh contracts from 25.1 lakh contracts during the corresponding period.
Since there has not been much change in price, nothing significant can be read from this OI data. Yet, like in Nifty futures, there has been some short build towards the end of last week.
The PCR of the nearest weekly expiry stood at 0.67. Thus, participants had written more call options versus put options. Call options with strike prices 44,200 and 44,500, with considerable outstanding OI, are the potential barriers for the index. That said, the PCR of June monthly options is at 1.09, a bullish sign.
Broadly, given the current positioning, Nifty Bank index is likely to be bearish until the current weekly options expire. But it could recover post that as hinted by the monthly options.
Given the prevailing conditions, one can go for bearish strategies for the week. Post a decline or after the expiration of current weekly contracts, traders can consider long positions.
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