Weakness Persists, Momentum Missing In Nifty Bank

Gift Nifty was showing a gap down by 150 points at 6:30 AM this morning. Dow closed lower by 748 points, Nasdaq closed lower by 438 points, and S&P 500 closed the day lower by 104 points in the previous days trade. This morning, Asian Markets were trading lower with Nikkei 225 down by 630 points, Kospi down by 26 points, and Hang Seng trading lower by 104 points. Dow futures were trading higher by 145 points, and Nasdaq futures were also trading higher by 90 points. Taking cues from Gift Nifty, the benchmark Nifty50 will likely open with a gap at 22,625-22,650 levels. US market futures have recovered a bit but not as much as they had fallen. Implied Volatility is down to 14.53, in a comfortable zone.

The data suggests weakness and a potential opening below the crucial zones of 22,725-22,800. This zone, which has acted as a big support for the last eight to nine trading sessions, will be a big resistance to break on the upper side. All the immediate moving averages are far away, and all supports and resistance levels will have to be referenced from the action of call and put writers. There will be a volatile opening 30 minutes of trade, where we can see put writers running for cover. Also, a watch should be kept on the levels where fresh call and put writing is happening, which will determine the support and resistance. It still remains a sell-on-rise market.

Nifty Bank is still stuck in a range. The momentum is missing from the markets. Nifty Bank is approaching its monthly expiry, and wild swings can be expected this week. FIIs are bearish on Nifty Bank. Here in Nifty Bank, which can open gap down by approximately 300 to 350 points, a similar approach as Nifty50 should be followed. One should wait for the first 30 minutes of trade to let Nifty Bank settle according to the market sentiment. The support and resistance will have to be drawn from the conviction of the call and put writers as the shortest moving averages are far away.

Options Chain Analysis 
Nifty50 (Expiry February 27)
For Nifty50, aggressive call writing was evident at every level from 22,800 to 23,500, while put writing at lower levels was relatively weak. The option chain was skewed in favour of call writers. The conviction of put writers was particularly weak at 22,800, with significant support at 22,500, where 8.255 million puts have been written. Conversely, call writers showed strong conviction, aggressively writing calls from 22,800 up to 23,500.  The upside remained restricted due to heavy call writing. The IV was 12.43 for puts and 12.19 for calls.

Nifty Bank (Expiry February 27)

For Nifty Bank, there was a significant shift from Thursday, with aggressive call additions from 48,800 to 50,000 and heavy put unwinding from 49,000 to 48,000. This has made the options chain bearish. The IV stands at 15.36 on the put side and 14.47 on the call side.

Support and Resistance
 - Nifty50: Major support at 22500; major resistance at 23000.
 - Nifty Bank: Major support at 48000; major resistance at 49000.
 - Sensex: Major support at 75000; major resistance at 76000. 

Put-call ratio and at-the-money
 - Nifty50: Overall 0.70; ATM 0.87 (bearish)
 - Nifty Bank: Overall 0.7; ATM 0.86 (bearish)
 - Sensex: Overall 0.7; ATM 0.98 (neutral to bearish)

Friday
Spot
Nifty50 opened with a gap down of 55 points at 22,857, while Nifty Bank started the day with a gap down of 206 points at 49,127. Nifty50 initially found support at the opening level and, after a brief dip, rebounded to reach 22,921 within the first five minutes of trading. However, selling pressure persisted from the early trades, with call writers aggressively writing calls. This led Nifty50 to drop to its intraday low of 22,733. As highlighted on Friday, this level acted as support, and from there, the index rallied to an intraday high of 22,921. The level of 22,900 was identified as a crucial point for options writers, and at around 9:45 AM, aggressive call writing pushed the market back down to 22,733 within 20 minutes. This level, previously mentioned as major support, was defended by the bulls once again. Despite multiple attempts to regain 22,800, Nifty50 failed to close above this level and ended the day at 22,795. Out of the 50 Nifty stocks, only 13 closed in the green.

Nifty Bank moved in tandem with Nifty50. It made an attempt to rise and touched an intraday high of 49,306 during the initial trades. However, similar to Nifty5050, it faced selling pressure and dropped to its intraday low of 48,764. Although the bulls attempted to push the index higher, resistance ensured that Nifty Bank remained range-bound between 48,800 and 49,100 before closing at 48,891. The index has now closed below the 10 and 20 DEMA levels, placed at 49,338 and 49,914, respectively. These levels will now act as resistance. Among the 12 Nifty Bank stocks, only one ended the day in positive territory.

It was a tough day for sectoral indices, with most of them experiencing losses. The only notable gainer was Nifty Metal (+1.02%). On the other hand, significant losses were seen in Nifty Next 50 (-0.94%), Nifty Mid Select (-1.69%), Nifty Midcap 100 (-1.32%), Nifty Auto (-2.58%), Nifty FMCG (-0.46%), Nifty Pharma (-1.92%), Nifty Consumer Durables (-0.41%), Nifty Realty (-1.27%), Nifty CPSE (-0.66%), Nifty PSE (-0.85%), Nifty Oil & Gas (-1.05%), and Nifty Small Cap 100 (-0.70%).