Resilient Markets Or A Bull Trap

Gift Nifty was down by 40 points at 6.30 IST today. On Tuesday, the Dow lost 478 points, NASDAQ 32 points, and the S&P 500 lost 43 points. In Asian trade today, the Nikkei 225 is up by 82 points and the Kospi is up by 32 points. Dow futures are up by 77 points; Nasdaq futures up by 59 points and the Hang Seng futures are up by 11 points.

Taking cues from Gift Nifty, Nifty50 will open at about 22440 – 22460. 

FII have today sold INR 22.24 Billion of stock and DII have bought 20.02 With addition of shorts in index futures and options, FIIs are bearish in the derivative segment during Tuesday’s trade. Taking into account the overall data, FIIs still carry a bearish sentiment. 

The momentum in Nifty50 will be seen today too. With a gap down opening, expect an immediate bounce. Nifty50 can face resistance at the 10 DEMA placed at 22486. The conviction of put writers is suggesting otherwise. A watch should be kept on 22500 level. A build-up of open interest of puts can push Nifty50 up to 20 DEMA placed at 22650. Nifty50 fell from this level during Monday’s trade. Any breach of 20 DEMA can push Nifty50 to 22700-22725, which is the call writers’ zone at strike 22700. 

On the down side, conviction of put writers has provided Nifty50 with good support at every level. With 20 MEMA placed at 22384 is a very strong support. Tuesday’s 8.982 million puts suggest 22400 is the initial support for Nifty50; and 11.10 million puts suggest 22200 as the major support. Initial resistance is seen at 22700 with 9.692 million calls; and major resistance is seen at 23000 with 14.90 million calls. India Vix has risen to 14.07, 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. The conviction of put writers is still strong at 48000 and no put unwinding was seen at 48000. 

With a gap down opening the conviction of put writers at 48000 will be tested again today. 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 trade. A volatile day’s trading is expected in Nifty Bank. With 100 Weekly Exponentially Moving average placed at 47542 will a strong support, 20 Monthly Exponential Moving Average placed at 48236 will be a strong resistance. Nifty Bank’s immediate resistance is at 48500 and major resistance is at 49000.The zone from 48000 till 47410 is the zone of the put writers. With 1.479 million puts, 48000 is the immediate support. The range for Nifty Bank is between 47500-49000. 

Previous Session
Nifty50 opened gap down by 114 points at 22345, while Bank Nifty opened gap down by 342 points at 47874.After a gap down opening Nifty50 sank to its intra-day low of 22314. The conviction of put writers was such that aggressive put writing was witnessed at 22300 from the onset of trading, which provided support and Nifty50 rebounded to 22485. At this level Nifty50 faced resistance at 10 DEMA, which pushed Nifty50 down to 22400 level. The conviction of put writers enabled them to add additional puts at 22400 to push Nifty50 to breach 10 DEMA to reach its intra-day high of 22522, to finally close the day at 22497. Nifty50 has gained nearly 200 points from its intra-day low during Tuesday’s trade. A good closing for Nifty50 as it has not only managed to close above 10 DEMA 22486 but also the close is in the higher range of day. India VIX has risen to 14.07, which is still within our comfortable zone. A rising India Vix is a sign of volatility in the markets. 33 stocks out of Nifty 50 stocks closed the day in green.

Nifty Bank, after a gap down opening slipped to its intra day low of 48707. As mentioned on Monday the conviction of put writers at 48000 was strong and fresh put writing was seen from early on. From the lows, Nifty Bank did rally to reach its intraday high of 48029 but selling pressure it down to  close at 47853. The biggest contribution in Nifty Bank’s fall was Indusind Bank which closed the day at ₹655.95, a loss of over 27% from its previous close. Indusind Bank alone contributed a loss of 810 points in Bank Nifty and 40 points to the Nifty50. Nifty Bank has formed a Doji candle and has barely closed over the important level 48744, which is swing low of January 27. It was a bad closing for Nifty Bank with only5 out of 12 stocks closing the day in green.

Options Chain
Nifty50 (expiry March 13)
The option chain inversed on Tuesday. It is more of a balanced option chain with a bullish bias in the favour of put writers, as is also evident from the pyramid chart. There has been substantial put writing at every level from 22500 till 22000. The conviction of  put writers has pushed  the call writers on the back foot. Some call unwinding was seen at 22600 and 22800 levels. Substantial fresh call writing was seen at 22900  and 23000 levels. With 8.982 million puts, 22400 is the initial support for Nifty50and 22200 is the major support. Nifty 50”s initial resistance is at 22700 and major one at  23000. The IV for puts is 15.97 and 14.95 for calls.

 

Nifty Bank (expiry March 27)
Despite the lower closing of Nifty Bank, the conviction of put writers at 48000 has not waivered. Additional put writing was witnessed from 48000 till 47000. This put writing is equally matched matched by call writers and the option chain is evenly placed. If Nifty Bank breaches 47700, it can trigger a short covering which can take it to 47500. With 1.259 million calls, 48500 is the imediate iresistance for Nifty 50 and with 1.729 million calls, 49000 is the major resistance. Put writers are in the 48000 to 47410 zone. With 1.479 million puts, 48000 is the immediate support. The range fof Nifty Bank is between 47500-49000. Implied Volatility for puts was 16.11, while for calls it was 14.76.

Sensex (expiry March 18 2025)
Tuesday was the weekly expiry of Sensex contracts. Not much can be said about the option chain yet. It appears that 74000 is the immediate support and and 74500 strike is the immediate resistance. Implied volatility for puts was 9.32, while for calls it was 13.57.

Support and Resistance
 - Nifty50: Major support at 22500; Major resistance at 22700
 - Nifty Bank: Major support at 47500; Major resistance at 48500.
 - Sensex: Major support at 74000; Major resistance at 74500.

Put-call ratio; at-the-money
 - Nifty50: Overall 1.1; ATM 0.89 (neutral to bullish)
 - Nifty Bank: Overall 0.9; ATM 1.35 (neutral to bullish)
 - Sensex: Overall1.2; ATM 1.04 (neutral to bullish)