The Nifty 50 (18,027) and the Nifty Bank (42,507) appreciated by a marginal 0.4 and 0.3 per cent, respectively last week. However, both the indices are facing resistance; and a rally, at least this week, appears less likely to occur. Here’s an analysis on futures and options data on both indices.
Nifty 50
The January futures contract of Nifty 50 shed premium at which it was trading over the spot index leading to a lesser gain of 0.2 per cent. It closed the week at 18,056 compared with the previous week’s close of 18,025. Thus, the upside lacked momentum which is also shown by the Open Interest movement in Nifty futures — the cumulative OI, at 137.2 lakh contracts, did not change much over the past week. Notably, we can see some short build-up on Friday as OIs went up as price fell. Considering this and that the index is facing a key resistance, the bias now is bearish.
The Put Call Ratio (PCR) of options expiring on January 25 (monthly expiry) also indicate weakness as it stands at 0.72. This suggests more call writing than put selling, hinting at a sentiment that the participants are not expecting a rally.
18100-strike call option, which added significant OI on Friday, remains the strike with highest outstanding OI at over 2.5 lakh contracts. This can act as a stiff barrier. On the other hand, 18000- and 17800-strike put options are the most active among the puts with nearly 1.3 lakh contracts each. These are the potential support levels as per the option chain. Given the bearish inclination, we might see the index touching 17,800 anytime this week.
Nifty Bank
The Nifty Bank January futures ended last week flat by closing at 42,551 as against 42,500 by the end of the preceding week. A lack of activity led to a drop in cumulative OI of Nifty Bank futures to 24.4 lakh contracts on December 20 compared with 25.6 lakh contracts on December 13. Hence, there is no clear indication about the possible direction along which the index can move this week.
Like the futures, the options data too are largely non-directional. That is, the PCR of the January 25 expiry option on Nifty Bank stands at 0.92, meaning the calls and puts are equally drawing the attention of participants. Taking a closer look at the option chain, 42500-strike is the most active among both call (1.1 lakh contracts) and put (1.06 lakh contracts) options. Other than this, 42000-put and 43000-call option has the highest outstanding OI at 0.94 lakh and 0.88 lakh contracts, respectively. Therefore, the index has a support at 42,000 and a resistance at 43,000.
Overall, the derivatives data of the index is pointing at a potential sideways movement within 42,000 and 43,000 this week.