Nifty Breaks 22500, Bears In Control

Gift Nifty was down by 195 points at 6.30 IST today. On Monday, the Dow lost 889 points, Nasdaq727 points, and the S&P 500 lost 156 points. In Asia trade today, the Nikkei 225 fell 756 points and the Kospi is up by 52 points. Dow futures are down by 118 points; Nasdaq futures down 198 points and the Hang Seng futures down by 14 points.

Taking cues from Gift Nifty, Nifty50 will open at about 22250 – 22270. 

FIIs sold ₹4.85 billion of stock and DIIs bought ₹2.64 billion With addition of shorts in index futures and options, FIIs were bearish in the derivative segment yesterday. 

Nifty50 will open, gap down, below the put writers zone of 22300. The moving averages are far away and support and resistance will have to be derived from the conviction of the put writers and call writers. 
A wait-and-watch policy should be used in today’s trade. One should observe the price action and build up of option positions in the first 30 minutes of today's trade, to let Nifty50 settle and then to gauge the direction of the markets. 

During Monday’s trade, substantial put unwinding was witnessed at 22300 level. Put writers have put their faith in 22000 level. A keen watch will have to be kept on the open interest build up at 22300 level. It will be a keen test of the convection of the put writers. Further put unwinding can lead to a break down in Nifty50 to test the levels of 21950 again-the swing low March 4. An increase in the put writing can lead to support in Nifty50 at 22300. A major resistance for Nifty50 will be at the10 DEMA of 22483 . India Vix has increased to 13.99, though it is well within the comfortable zone, the continuous rise in India Vix does indicate volatility in the markets. 

Nifty Bank has shown signs of weakness. FIIs are bearish in in Nifty Bank futures. With the bad closing on Monday, data suggests that the conviction of put writers is still strong at 48000 and no put unwinding was witnessed at 48000 during Monday’s trade. A similar approach as Nifty50 approach should be employed for Bank Nifty too. If Nifty Bank opens below 47881, which is the swing low of January 27, the level of 47500 is open. One should let Nifty Bank settle for the first 30 minutes of trade and then gauge the direction of the market. With a gap down opening the conviction of the put writers at 48000 will be tested in the initial trade minutes.  A volatile day’s trading is expected in Nifty Bank, with strong resistance at the20 Monthly Exponential Moving Average of 48236. With 1.322 million puts 48000 is the support for put writers and with 1.621 million calls, 49000 is for call writers. 

Yesterday
Nifty50 opened gap down by 30 points at 22521, while Bank Nifty opened 185 points lower at 48212.Nifty50 rebounded after a gap down opening and rallied to its intra day high of 22676,faced resistance at 20 DEMA, and slowly fell for the rest of the trading session to its intra-day low of 22430 to finally close at 22460. Nifty50 has breached and closed below 10 DEMA placed at 22483 which is now a resistance. Nifty50 has lost more than 200 points from its intra-day high during Monday’s trade. A bad closing for Nifty50. India VIX rose to 13.99, which is still within our comfortable zone, but showing signs of volatility. Data suggested a neutral stance with a bearish bias.  As Nifty50 is trading below the the moving averages, support and resistance levels will have to drawn from the conviction of put and call writers. Put writers were firm at 22000 levels, whereas call writers were active at 22600 levels for Nifty50. The market has once again turned into a sell on rise market. Nine stocks out of Nifty50 stocks closed the day in green.

Nifty Bank, after a gap down opening rallied to breach 10 DEMA to its intra-day high of 48599. The momentum was missing from Nifty Bank and could not sustain above 10 DEMA placed at 48539. Nifty Bank slipped below 10 DEMA and traded within a range of 100 points until sudden selling pressure emerged at 2.15 PM pushed Nifty Bank down to its intra-day low 48155 to finally close the day at 48215. It was a bad closing for Nifty Bank. None of the banking stocks could close the day in green.
 
Options Chain
Nifty50 (expiry March 13)
The option chain has tilted in the favour of the call writers. There has been substantial put unwinding at 22300 level. The conviction of the put writers has been broken during Monday’s trading session. Aggressive call writing was witnessed on every strike 22500 onwards. There is no meaning full support till 22200 and strong support is at 22000 as is very clear form the pyramid chart. With 6.254 million puts 22200 is the initial Support and with 8.596 million puts 22000 is the major support. With 7.76 million calls 22600 is the initial resistance and with 9.52 million calls 22700 will be act as a major resistance. The IV on the put side is 12.27 and is 11.19 on the call side.

 

Nifty50
Nifty Bank (expiry March 27)
Additional call writing was seen from 48400 till 49000. This call writing is not matched by the put writers. This option chain favours call writers and put writers are on the back foot. If Nifty Bank breaches 47700 levels, and trigger a short covering which can take Nifty Bank down to 47500 level. With 1.62 million calls, 49000 is the immediate resistance and with 1.322 million puts, 48000 is the immediate support. The range was between 48000-49000. Implied Volatility for puts was 17.72, while for calls it was 12.88.

Sensex (expiry March 11)
Today is the weekly expiry of Sensex contracts. Aggressive call writing has taken place from 74100 onwards till 75000. This call writing is not matched by equal and put writing. Option chain is tilting in favour of the call writer. Below 74000 there is no meaningful support till 73500. Expect to be a volatile expiry today. Immediate support was at 74000 and resistance at 74500. The range for todays expiry can be between 73500 – 74500. Implied volatility for puts was 12.82, while for calls it was 11.49.

Support and Resistance
- Nifty50: Major support at 22300; Major resistance at 22700
- Nifty Bank: Major support at 48000; Major resistance at 49000.
- Sensex: Major support at 74000; Major resistance at 75000.

Put-call ratio; at-the-money
 - Nifty50: Overall 0.80; ATM 0.70 (bearish)
 - Nifty Bank: Overall 0.9; ATM 1.10 (neutral to bullish)
 - Sensex: Overall 0.9; ATM 0.74 (bearish to neutral)