Market To Take Cues From RBI Decision On Interest Rates

Market Setup

Foreign Institutional Investors have added short futures in Nifty50 and long futures in Bank Nifty. FIIs have also added call and puts in index options and booked some quantities in stock futures. It seems that FIIs are bullish on Bank Nifty and bearish on Nifty50.

Proprietary desks are neutral--not leaning towards buying or selling; a balanced position--in index futures and options but slightly bullish in stock options. The overall setup is neutral, but not much can be said today due to the weekly expiry of Nifty50 weekly contracts.

With the Gift Nifty closing slightly up by 20 points, and the Implied Volatility remaining within a moderately volatile zone, no concrete signals can be drawn from the option chain. Friday morning will be a wait-and-watch.

FIIs have added more shorts in Nifty Futures and are bearish in options. 

The 200 DEMA is at 23614, and 50 DEMA at 23662. These levels will act as resistance. The 10 DEMA is at 23458, and 20 DEMA at 23428, and these levels will act as good support. 

Dow  and NASDAQ futures are neutral at this time on Thursday evening. The price action of Thursday is definitely negative.

All eyes will be on the RBI’s decision on interest rate decision to be announced today morning. The momentum is missing from the markets, and we will have to wait for the market reaction to RBI’s decision on interest rates.

If there is a break below the 23600 levels, the next support will be at the 10-day DEMA placed at 23458, and then at the 20-day DEMA at 23428. If there is a positive upward movement, the 23800 levels will open up, which is the swing high-a point where the price peaked before reversing direction-of February 5, 2025. 

Bank Nifty has regained and closed over 200 DEMA placed at 50213, after breaking it in intraday trades. In the last one hour of trade, Bank Nifty gained 250 points to close at the highest point of the day, signifying strength. The Bank Nifty is better placed than Nifty50.

The 100 DEMA placed at 50647 will act as resistance  for Bank Nifty, and the 200 DEMA placed at 50213 will act as good support. It's still a buy-on-dip market for Bank Nifty. 

A lot will depend on the RBI’s  decision on interest rates. 

Yesterday
Spot
Nifty50 opened gap up by 65 points at 23761, and Bank Nifty opened gap up by 125 points at 50468. The Nifty50 traded in line with our morning report.

Nifty50  opened at a strong resistance level of 23761, which is a price level where selling interest may increase, and fell from the day's high of 23773. Throughout the trading session, Nifty50 gradually moved downwards to make a low of 23556 and then closed the day just shy of the 200 DEMA at 23603. The 200 DEMA is an Exponential Moving Average that gives more weight to recent prices. Overall, it was not a good close, as Nifty50 could not close above the 200 DEMA. However, this is an adjusted closing, so we can say that the 200 DEMA was regained, albeit marginally. As reported in yesterday’s report, it was a dull expiry as predicted, with no wild swings or spikes. AmongNifty50 stocks, 19 closed the day in the green..

Bank Nifty performed better than Nifty50. It dipped to 50207, from where it found support at the 50 DEMA and 200 DEMA, both serving as potential points where buying interest might increase. It climbed to 50375 levels before some profit booking pushed Bank Nifty down to its intraday low of 50150. Buying emerged towards the end of the trading session, pushing it up to a closing of 50382. Six out of 12 banking stocks closed the day in the green.

It was a bad day for other indices. Notable losers included Nifty Next 50 at -0.74%, Nifty Mid Select at -0.99%, Nifty Metal at -0.75%, Nifty Midcap at -1.26%, Nifty PSE at -1.47%, Nifty CPSE at -1.89%, Nifty FMCG at -0.96%, and Nifty Consumer Durables at -1.84%. Notable gainers included Nifty Pharma at +0.64% and Nifty IT at +0.31%.

Options Chain
(Nifty Expiry February 13)

Nifty50: Not much can be said about the options chain expiring on  April 13, as it is still not properly formed. The current options chain appears to be lopsided and in favour of call writers. This is also evident from the pyramid bar chart of Nifty50, which visually represents the distribution of call and put options.

Heavy call writing was observed at every level from 23600 onwards up to 24000, indicating that traders expect the price to stay below a certain level. The conviction of the call writers was much stronger, as the number of calls written was significantly higher compared with the number of puts. The IV on the put side was 14.97, while it was 13.65 on the call side. Implied volatility reflects the market's expectations of future price movements; higher IV suggests greater expected volatility.

Bank Nifty: (Expiry  February 27)
Put writers rolled up the puts from 49500 to 50000. Rolling up refers to the strategy of closing an existing position and opening a new one at a higher strike price. Fresh call writing was seen from the 50100 level up to 51000 levels. This addition of calls at 51000 establishes it as an immediate resistance level, meaning that it is a price point where selling interest may increase. The 50000 level serves as a strong base, indicating a significant level of support where buyers may emerge.

Support and Resistance
- Nifty: Major support is at 23500 and major resistance is at 23700.
- Bank Nifty: Major support is at 50000 and major resistance is at 51000.
- Sensex: Major support is at 78000 and major resistance is at 78500. 

Put-call ratio
- Nifty50: Overall 0.8 and at ATM 0.75 (Bearish)
- Bank Nifty: Overall 0.90 and at ATM 1.92 (Bullish)
- Sensex: Overall 0.70 and at ATM 0.71 (Bearish)