Nifty 50 (24,823) and Bank Nifty (50,933) rallied 1.1 per cent and 0.8 per cent respectively last week. The chart hints that Nifty futures is losing the positive momentum, whereas Bank Nifty futures fails to see a fresh breakout.

Below is an analysis of futures and options data of both indices.

Nifty 50

Nifty futures (August) (24,854) advanced 1 per cent over the past week. The cumulative Open Interest (OI) of Nifty futures, too, went up – it rose to 137.2 lakh contracts on August 23 versus 133.1 lakh contracts on August 16.

A price rally along with an increase in OI is an indication of fresh long build-up.

Corroborating the positive bias, the Put Call Ratio of August options contracts stood at 1.2 on Friday, indicating a relatively greater number of put option selling. Traders sell puts when their inclination is bullish.

However, the contract is now trading in the narrow range of 24,800-24,860. The upper boundary of this band — 24,860 is acting as a good resistance now.

A breakout of this can lift it to 25,000 and then possibly to 25,200. But if the bears gain strength, the contract may see a decline.

The nearest support is 24,800 with subsequent ones at 24,750 and 24,580. As it stands, the likelihood for a rally and a corrective decline is the same.

Strategy: We suggested buying Nifty futures at 24,450. Retain this trade. But tighten the stop-loss from 24,300 to 24,750. Book profits at 25,000.

Participants who bought call options too can hold. Exit the option at the prevailing price when Nifty August futures touch 25,000.

Fresh trades are not recommended at the current level. Being an expiry week, volatility can remain higher.

Bank Nifty

Bank Nifty futures (August) (50,966) gained 0.7 per cent last week. But the cumulative OI of Bank Nifty futures dropped. It stood at 33.3 lakh contracts on August 23 against 36.4 lakh contracts on August 16.

An upswing in price accompanied by a decline in OI shows covering of short positions. This cannot be taken as an outright bullish signal, especially when the contract remains below a strong barrier.

The chart shows that Bank Nifty August futures is facing a resistance at 51,000. So, the sideways range of 49,850-51,000 stays true. Also, a falling trendline and the 38.2 per cent Fibonacci retracement of the prior downswing lies at 51,250.

So, until the contract decisively breaks out of 51,250, the bias will be bearish. A decline below 50,900 can drag it to 50,450. The downswing can extend to 49,850.

However, a breakout of 51,250 can result in a swift rally to 52,000, the nearest notable resistance. Subsequent resistance is at 53,000.

Strategy: If Bank Nifty futures slip below 50,900, initiate short with a stop-loss at 51,250. When the contract touches 50,450, revise the stop-loss to 50,800. Book profits at 50,000.

But if the contract breaks out of 51,250, go long with a stop-loss at 50,900. When the price hits 51,800, trail the stop-loss to 51,500. Exit at 52,000.

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