Indecisive Markets

Today’s market setup
Gift Nifty was showing a gap down of 29 points at 6:30 AM this morning. Dow closed lower by 450 points, Nasdaq closed lower by 94 points, and S&P 500 closed the day lower by 26.52 points in yesterday's trade. Asian Markets are a mixed bag with Nikkei 225 down by 33 points, Kospi down by 13 points, and Hang Seng trading lower by 367 points. Dow futures are trading higher by 22 points, and Nasdaq futures are also trading higher by 25 points. Taking cues from Gift Nifty, Nifty50 will likely open slightly gap down or flat around yesterday's close. Foreign Institutional Investors sold ₹33.12 billion of stock in the cash market yesterday and are not missing any chance to sell in our markets, indicating their bearish view.

Despite the range-bound day, yesterday's expiry was dull. Implied Volatility fell to 14.68 and is in a comfortable zone. Due to the weekly expiry of Nifty50 contract yesterday, not much can be said about the option chain. Taking cues from the data that has come in, it can be concluded that the level of 22,900 is still the key level to watch for morning's early trades. Any convincing break of this level, Nifty50 can once again dip to 22,800-22,725 levels, which has till now acted as strong support for the Nifty50. Any move of Nifty50 above 23,000 can initially take it up to the 10 DEMA placed at 23,057, which will act as resistance. A break above this can take Nifty50 up to 23,110-23,177, where 23,130 is the level of 23,000 call writers and 23,177 level is where the 20 DEMA is placed. At the 22,900 level, bears and bulls have been jostling for resistance and support for the last three to four sessions. Any increase in the put side on the 22,900 level will give support to the market and conversely, any increase in the OI in call side will extend the resistance to Nifty50. The level 22,800 till 22,725 has already been tested multiple times and seems to be holding. It is a strong demand zone. Any break of this zone will open up Nifty50 to the 21,400 level, which is the swing low of the third week of May. Any rise in the markets is an opportunity to sell, at where and when the rally fails. 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. The conviction of put writers on 49,000 is still there but an addition of 411,000 puts has taken place at 48,500 levels. Call writing is seen at the 49,000 level, a key level, till 50,000. One should wait for the first 30 minutes of trade to let Nifty Bank settle according to the market sentiment. Any sustenance above yesterday's 10 and 20 DEMA and breach of yesterday's high of 49,455 can take the Nifty Bank to 50,000. With 1.553 million puts, 49,000 is the major support and, with 1.212 million calls, 50,000 is the resistance.
 

Options Chain 
Nifty50 (February 27 expiry)
Yesterday was the expiry for Nifty50 weekly contracts. The next week’s expiry is the monthly expiry of Nifty50 contracts. Aggressive call writing was seen at every level from 22900 to 23500. Similar put writing was observed at every level from 22900 to 22500. The option chain was evenly placed, but positions will be created from today onwards. The conviction of the put writers is very strong at 22800 and the conviction of the call writers is very strong at 23000. The level of 22800 has not been breached despite the best efforts of the bears despite multiple attempts.

Nifty Bank (February 27 expiry)
Not much changed from Wednesday. There was some call writing at every level from 49100 onwards till 50000. Some put unwinding was visible from 49000 till the 48600 level. 411K puts were added at the 48500 level. The option chain is evenly placed with the PCR at 1.03, which indicates neutral to bullishness in the option chain. With 1.309 million calls and 0.999 million puts, it slightly favours the bears. With 1.483 million puts, meaningful support was at 49000. On the upward journey, with 1.513 million calls, the 50000 level was the resistance. The IV at the put side was 15.27 and is 17.19 for call options.

Support and Resistance

• Nifty50: Major support at 22800; major resistance at 23200.
• Nifty Bank: Major support at 49000; major resistance at 50000.
• Sensex: Major support at 75500; major resistance at 76000.

Put-call ratio and at-the-money

• Nifty: Overall 0.80; ATM 1.10 (neutral to bullish)
• Nifty Bank: Overall 0.8; ATM 1.04 (neutral to bullish)
  
• Sensex: Overall 0.8; ATM 1.10 (neutral to bullish)

Yesterday
Nifty50 opened gap down by 111 points at 22821 and Nifty Bank opened gap down by 256 points at 49314.

As mentioned yesterday, Nifty50 opened near the important support level of 22800 and moved to its intraday low of 23812. As we have been witnessing for the last week, the 22800 level acted as major support, and Nifty50 rebounded to 23900 levels. Another attempt was made by the bears to push the markets down, and once again, support was taken at the 23812 level to bounce back to the 23900 level. From around 10AM onwards, Nifty50 was range-bound in 50 points with 22870 on the lower side and 22923 as its intraday high on the higher side. Nifty50 finally closed the day at 22913. Option writers had a grip yesterday and enjoyed the premiums of both sides. The weekly expiry was dull, range-bound between 22800 and 23000. The 22800 level has been defended by the bulls for the sixth time in the last one week. 28 stocks out of Nifty 50 stocks closed the day in green.

Nifty Bank, though better placed than Nifty50 in Wednesday’s close, did not carry the momentum that was there on Wednesday. The conviction of put writers was very strong at the 49000 level, as mentioned yesterday. It opened gap down at 49314 and rebounded along with Nifty50 to reach its intraday high of 49455. It faced resistance at 10 and 20 DEMA placed at 49437 and 49491 respectively, to finally close the day at 49234. Nifty Bank has now given a close below the 10 and 20 DEMA, and these levels will now act as resistance. Nine out of 12 Nifty Bank stocks closed the day in green.

The notable sectoral gainers were Nifty Next 50 (+1.47%), Nifty Mid Select (+1.08%), Nifty Midcap100 (+1.26%), Nifty Metal (+1.96%), Nifty Auto (+1.22%), Nifty Consumer Durables (+0.48%), Nifty Realty (+1.12%), Nifty CPSE (+2.23%), Nifty PSE (+2.15%), Nifty Oil & Gas (+1.23%), and Nifty Small Cap 100 (+1.43%). The notable losers were Nifty IT (-0.14%), Nifty FMCG (-0.04%), and Nifty Pharma (-0.16%).