Nifty 50 Outlook Weak, Nifty Bank Seen Strong

The Gift Nifty was up by 120 points at 6.30 IST today. As Friday was a holiday on account of Holi, we need to digest two days of trade in the US markets today. During Thursday’s trade Dow had lost 537 points, Nasdaq had lost 345 points and S&P 500 had lost 78 points. The net gain of the two days of trade: Dow up by 137 points, Nasdaq up by 106 points and S&P 500 up by 39 points. In Asian trade today, the Nikkei 225 is up by 406 points and the Kospi is up by 48 points. Dow futures are down by 145 points; Nasdaq futures down by 107 points and the Hang Seng futures up by 424 points.

Taking cues from Gift Nifty, Nifty50 will open in the range of22,500 – 22,525. FIIs sold ₹7.93 billion of stock on Thursday, while DIIs bought worth ₹17.24 billion on Thursday.  With addition of shorts in Index futures and options, FIIs were bearish in derivatives. 

With a gap up opening, Nifty 50 will open over the 10 DEMA at 22,467, just below the conviction of call writers at 22,500. For the last six trading sessions, Nifty50 has not been able break the range. The larger trend of Nifty50 is bearish. Today will be the first day of the weekly contract as Friday was a holiday, hence no conclusive direction can be determined from the data of the option chain. One should wait for the first 15 minutes of trade and observe the OI build up at 22,500 and 22,600 level. 

Nifty50 opening will be placed between 10 DEMA at 22,467 which can act as support and 20 DEMA placed at 22,610, which will act as a resistance. If 20 DEMA is breached, short covering can push Nifty50 to 22,750. If Nifty50 shows sign of weakness and starts trading lower in the opening ticks, the 20 MEMA placed of 22,375 will act as support. If Nifty50 starts trading below 20 MEMA, no meaningful support can be expected till 22,000. India VIX is down to 13.28, suggesting a decrease in volatility. 

Nifty Bank is better placed than Nifty50 and is showing signs of strength. FIIs have added longs in index futures in Nifty Bank. With an inconclusive closing on Thursday, data suggests that the conviction of put writers is still strong at 48,000 and no put unwinding was seen at 48000. With a gap up opening and negative data in Nifty50, one should observe the price action in the first 30 minutes of today’s trade, to gauge the direction of the markets. There are a few major moving averages placed between 48,000 and 48,500. The MEMA is placed at 48,195, 10 DEMA at 48,297 and 20 DEMA at 48,591. Unless Nifty Bank closes above these levels, it will be a sell on rise market. If Nifty Bank breaches 48,500, short covering can take it to 49,000 . The 100 Week Exponentially Moving Average at 47,546 will be a strong support. Nifty Bank’s option chain is evenly balanced between put and call writers. If Nifty Bank breaches 47,700, it might trigger a short covering which could take Nifty Bank down to 47,500 levels. Nifty Bank’s immediate resistance is at , 48,500 and major resistance is at  49000;. while immediate support is seen at48,000. Nifty Bank’s is expected to trade in the 47500-48500 range.

The Sensex option chain appears to be tilting in favour of call writers, with major support seen at at 73,000 and major resistance at74,000. For Nifty50, no meaningful support can be expected till 22,000. Nifty Bank’s option chain is evenly balanced between put and call writers. The initial resistance for Nifty Bank is at 48,500 and immediate support at 48,000. The major support for the Sensex is at 73,000 and major resistance at 74000.

Previous Session
Spot
Nifty50 opened gap up by 71 points at 22,541; while Nifty Bank opened gap up 162 points at 48,291. After a gap up opening, Nifty50 could not carry the momentum into Thursday's trade. Nifty50 slipped at the opening ticks and slipped below 22,500 and took support at the 10 DEMA of 22,467 to reach its intra-day high of 22,558. After battling for dominance at 22,500, call writers overwhelmed put writers. This resulted in Nifty50 slipping lower to breach the 10 DEMA, and took support at 20 MEMA to close at 22,397 with a loss of 73 points. Nifty50 lost nearly 180 points from its intra-day high during Thursday's trade. It was a bad closing for Nifty50 as it just managed to take support at 20 MEMA. India VIX fell to 13.28, which was well within the comfortable zone and also signalled a decrease in volatility in the markets.
 
As expected, Nifty Bank was better placed than Nifty50. After a gap up opening, Nifty Bank rallied to its intra-day high of 48348. It faced resistance from the 10 DEMA and slipped lower to trade between 48,120 and 48,230. Selling pressure mounted during the last hour, pushing Nifty Bank down to its intra-day low of 48,011 and close at 48,060 with a gain of 4 points. Nifty Bank managed to defend the level of 48,000 and ended with 6 of 12 stocks in the green.
 
Options Chain
Nifty50 (expiry March 20)
Thursday was the weekly expiry of the Nifty50 contracts. The new option chain appears to be tilting in favor of call writers.  The IV on the put side was 11.87 and 9.64 for call options. 

Nifty Bank (expiry March 27)
Nothing much appears changed from Wednesday. The conviction of put writers was evident with fresh writing seen at 48,000. The option chain was evenly balanced between put and call writers. Implied Volatility for puts was 15.07, while for calls it was 12.47.

Sensex (expiry March 18)
Aggressive call writing was witnessed from 73,800 level onwards till 75,000. Implied volatility for puts was 9.86, while for calls it was 8.66.

Support and Resistance
- Nifty50: Major support at 22,000; Major resistance at 22,600
- Nifty Bank: Major support at 48,000; Major resistance at 48,500.
 - Sensex: Major support at 73,000; Major resistance at 74,000.

Put-call ratio; at-the-money
 - Nifty50: Overall 1.0; ATM 0.69 (bearish to neutral)
 - Nifty Bank: Overall 0.9; ATM 0.95 (neutral)
 - Sensex: Overall 0.8; ATM 0.76 (bearish to neutral)