Markets In No Trade Zone

February 10

Foreign institutional investors have added short futures in Nifty 50 and Bank Nifty, indicating a bearish outlook on these indices. FIIs have also added calls and puts in the Index Options, which suggests they are hedging their positions or expecting volatility. Additionally, they have added some contracts in Stock Futures. Overall, FIIs are bearish on Indices.

Proprietary Desks are bullish on Index Futures and neutral on Options. This means they expect the market to rise but are cautious about potential risks. They are slightly bullish on stock options, showing some optimism in individual stocks. Retail investors and other market participants are mildly bullish on Index Options and Stock Options, suggesting they expect positive market movements. 

The overall setup is bearish, which means that despite some bullish indicators, the market sentiment leans towards a potential downward movement.

Today’s Market Setup
Gift Nifty is down by 80 points (Friday close). The Dow and Nasdaq have also closed lower by 444 and 268 points respectively. Gift Nifty could have been reacting to the lows made by Dow futures and Nasdaq futures, indicating global market sentiment.

If Gift Nifty is correct and Nifty opens about 80 points down, then it will open at about 23450 levels, which is in the zone of 10 DEMA at 23477 and 20 DEMA at 23440. These moving averages are important technical indicators. Any break below these levels opens up the levels of 23200 for Nifty50, followed by the key psychological level of 23000..

Any break of the 23000 level will open the lower level of 22785, which is a very crucial level for Nifty50. This is the swing low of January 28 and also the level of June 7, 2024, from where Nifty50 started its upward march towards its highest point of 26277.

With the Implied Volatility coming down after an important event, volatile moves will be restricted. FIIs  being short in all segments of the market, coupled with a not-so-good earnings season by Indian companies till now, also does not inspire positive sentiment in the markets.

We will have to take cues from the first hour of trade on Monday morning. Any 15-minute break below the 20 DEMA should be an opportunity to sell in the markets. The upside is limited by the 200 DEMA at 23610, converging with the 50 DEMA and also the zone of 23500 call writers (option sellers who create resistance at this level).

Bank Nifty has also surrendered and closed below its 200 DEMA. There is increased selling pressure in Bank Nifty Futures, and it has given up all the gains of the last couple of days. At present, Bank Nifty is in a no-trade zone, sandwiched between a rising 10 and 20 DEMA at 49756 and 49633 respectively, and 50 and 200 DEMA placed at 50198 and 50213 respectively. These levels can also be the range of Bank Nifty until one of the levels is broken convincingly.

The 100 DEMA, placed at 50647, is 500 points away and will only come into consideration once the 50 and 200 DEMA are broken. The structure of Bank Nifty has been broken, and one should wait for a definite movement towards one side, breaking any one of the levels to enter and trade in Bank Nifty. The range of Bank Nifty has narrowed, and traders can expect a violent move after some consolidation.

The low made on  February7 are very important, and any break of this would open the levels of 49500. 

Friday
Spot
Nifty50 opened gap up by 46 points at 23649, and Bank Nifty opened gap up by 102 points at 50484. As mentioned on Friday,  Nifty50 opened at the resistance level of 50 DEMA and faced rejection from the opening tick onwards.

As soon as the Reserve Bank of India RBI announced its monetary policy decision, Nifty50 attempted to recover but once again faced resistance at the 50 DEMA, falling to 23500. Some buying then emerged, taking Nifty50 to its intraday high of 23694. From there, it fell to 23443, which is the zone of 10 DEMA and 20 DEMA, as mentioned on February 7.

Nifty50 gained 100 points from this low to close the day at 23559, well below the 200 DEMA (23610) and 50 DEMA (23645). The 23700 level has become a strong supply zone for Nifty50, meaning it's likely to face stiff resistance at this level. This is also the level from 9th January where Nifty began its downward journey after some consolidation.

Overall, it wasn't a good close for Nifty50. It was a roller coaster day as Nifty50 traded in a range of 250 points, testing both upper and lower boundaries.  Out of Nifty50 stocks closed the day in green 

Bank Nifty performed slightly better than Nifty50 in the early trading hours. It didn't lose much in the early trades and made a high of 50641 after the RBI's monetary policy announcement. It faced immediate resistance from the 100 DEMA placed at 50638 and fell to its intraday low of 49871, nearly reaching the 10 DEMA placed at 49756. Bank Nifty recovered 300 points to close the day at 50158. Six out of 12 banking stocks closed the day in green.

It was a mixed bag for other indices. Notable gainers were Nifty Next 50 (+0.02%), Nifty Mid Select (+0.32%), Nifty Metal (+2.66%), Nifty Midcap 100 (+0.20%), Nifty Auto (+0.69%), and Nifty Consumer Durables (+0.97%). Notable losers were Nifty CPSE (-0.79%), Nifty FMCG (-1.30%), and Nifty Oil and Gas (-0.90%). 

Options Chain: (Nifty50 Expiry February 13)
Nifty50
The option chain of February 13shows that that call writers have much more conviction than the put writers. The option chain is heavily loaded in favour of call writers.

Aggressive call writing is seen at every level from 23500 onwards till 24000, indicating heavy resistance at every level. This means traders expect it will be difficult for Nifty50 to rise above these levels. No such matching put writing is observed from 23500 downwards, which is an indication towards the possibility of downward movement of Nifty50.

Put writers show some conviction on the 23200 level followed by the 23000 level, suggesting these might act as support levels. Overall, it's a weak option chain for bulls.

It is also very evident from the pyramid bar chart of Nifty50 that the height of the bars for calls is much more than the height of bars for puts, further confirming the bearish sentiment. The IVat the put side is 13.82 and is 11.07 on the call side.

Bank Nifty (Expiry February 27)
There has been fresh call writing at every level from 50200 onwards, and there has been put unwinding (closing of previously sold put options) at every level from 50600 onwards till 49000. With 1.4 million  put writing at 49000, it will be the support for Bank Nifty, and with 1.277 million call writing, 51000 will be the resistance for Bank Nifty. These levels are likely to act as key price points in the near term.

The IV at the put side is 16.52 and is 14.87 on the call side, indicating slightly higher expected volatility on the downside.

Support and Resistance
 - Nifty: Major support is at 23200 and major resistance is at 23600.
 - Bank Nifty: Major support is at 49000 and major resistance is at 51000.
 - Sensex: Major support is at 77500 and major resistance is at 78000. 

Put-call ratio and at-the-money
 - Nifty: Overall 0.65 and at ATM 0.70 (Bearish)
 - Bank Nifty: Overall 0.90 and at ATM 0.87 (Neutral to Bearish)
 - Sensex: Overall 0.60 and at ATM 0.79 (Bearish)