Neutral Data Suggests A Dull Expiry

Gift Nifty was showing a gap down by 20 points at 6:30 AM this morning. Dow closed higher by 71 points and NASDAQ closed higher by 14 points in yesterday's trade. At around 6:30 AM, Asian markets were a mixed bag with Nikkei 225 down by 370 points, Kospi down by three points, and Hang Seng trading lower by 32 points; Dow futures were trading lower by 54 points and Nasdaq futures also trading lower by 43 points. 

Taking cues from Gift Nifty, Nifty50 will likely open slightly gap down or flat at around yesterday's close. FIIs have not missed a chance to sell in our markets. Taking into account the data, FIIs still carry a bearish sentiment in Indian markets.

Despite the range-bound day on Wednesday, today's expiry can also be a range-bound affair between the all-important levels of 22800 and 23000. On Wednesday we said data is suggesting consolidation with a bearish tone. Today's data suggests the same. The Implied Volatility at 15.42 remains slightly above the comfortable level of 15. Today the level to watch will be 22900. Any convincing break of this level could send Nifty50 down to 22800, which has 7.00 million puts outstanding. Any move of Nifty50 above 23000 can trigger short covering to take Nifty50 up to the 10-day Exponential Moving Average placed at 23090, which is also the zone for 23000 call option writers.

At 22900, bears and bulls are jostling for control. Any increase in put options at the 22900 level will provide support to the market, while any increase in the Open Interest on the call side will extend resistance to Nifty50. The entire bias of the FIIs is on the bearish side. The level 22800 to 22725 has already been tested multiple times and seems to be holding. It is a strong demand zone, which indicates a bottom for Nifty50 at least for this weekly expiry. Any rise in the markets presents an opportunity to sell when the rally fails. It still remains a sell-on-rise market. Expect a range-bound expiry where option strategies like Iron Condor or short strangle will likely work better.

Nifty Bank has been able to close at the high of the range. FII positioning is bullish in index options for Nifty Bank. The conviction of put writers on 49000 is still there and should become stronger today. Call unwinding is seen at the 49000 level today. 49500 will be a key level to watch. Traders will likely wait for the first 30 minutes of trade to let Nifty50 settle for its expiry and take positions according to market sentiment. Any sustained trading above yesterday's high of 49628 could take Nifty Bank to 50000. The 10 and 20 DEMA placed at 49437 and 49491 respectively will act as support levels. With 1.553 million puts outstanding, 49000 is the major support and with 1.212 million calls, 50000 is the resistance. 

Options Chain
Nifty50 (expiry February 20)

Aggressive call writing was seen at every level from 22900 till 23500. Similar put writing was not observed. The option chain was lopsided in favour of the call writers. The conviction of the put writers was dented once again. Call writers rolled down the calls from 23200 to 23100.

As visible from the bar chart, the difference between the calls and puts at 22900 was about 700K excess puts. This level of 22900 has now become the level for control between the bulls and bears. With the addition of 2.435 million puts, 23800 is the immediate resistance followed by 22500. The level of 22800 has not been breached despite multiple attempts by the bears. This level can be the strong support for tomorrow's weekly expiry.

Similarly, with addition of 2.220 million calls totalling 8.243 million calls, 23000 followed by level 23100 with 10.100 million calls are the strongest resistance levels. Despite multiple attempts, a closing above 23000 level could not be achieved. The IV for put options was 15.85 and is 15.72 for call.

Nifty Bank (Expiry 27th Feb 2025)

Significant put writing was seen at every level from 48500 till 49500. Some call unwinding is observed at every level from 49000 till 50000. The option chain is evenly placed with the Put-Call Ratio in bearish-to-neutral territory.

With 1.046 million calls and 0.912 million puts, it was even ground for bulls and bears at this level. Any increase in puts here will provide support to Nifty Bank and any increase in calls will provide resistance.

Support and resistance
 - Nifty50: Major support s at 22800; major resistance at 23100.
 - 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 0.70; ATM 0.74 (bearish)
 - Bank Nifty: Overall 0.8; ATM 0.86 (bearish)
 - Sensex: Overall 0.8; ATM 0.97 (bearish to neutral)

Yesterday
Nifty50 opened gap down by 98 points at 22847 and Nify Bank opened gap down by 191 points at 48895. Initial selling pressure took Nifty50 down to its intraday low of 22816. As we have been saying in our recent reports, this zone of 22800 is a strong demand zone and 23000 a strong supply zone. Nifty50 took support from here to reach its intraday high of 23049, where it faced resistance to fall to 22900 and then climb back to 23000 levels where it stayed until 2 PM.

Selling pressure gave another dip to Nifty50 towards 22850 level, but bulls were able to regain 22900 levels. Multiple attempts were made to breach 23000 by the bulls, but they were not successful in sustaining above 23000, finally closing the day at 22932. Nifty50 did trade in the range of 22800 to 23000 as reported in our previous report. It was a day for consolidation for Nifty50, as it prepares for today's weekly expiry. 25 stocks out of Nifty50 stocks closed the day in green.

Nifty Bank is better placed than Nifty50. Short covering rally was observed in Nifty Bank. Some initial selling pressure drove Nifty Bank to its intraday low of 48807. As reported previously, the conviction of put writers was very strong at 49000 level. Buying emerged in PSU banking stocks followed by private banks, which led Nifty Bank to its intraday high of 49622. Nifty Bank managed to regain its 10 and 20 Day Exponential Moving Averages (DEMA) and traded around this level. At 2 PM, some selling pressure drove Nifty Bank down again to 49250, but bulls not only managed to push Nifty Bank above the 10 and 20 DEMA placed at 49480 and 49488 respectively, but closed the day at 49570. All 12 Nifty Bank stocks closed the day in green.

It was a mixed day for other sectorial indices. The notable gainers were Nifty Next 50 (+1.19%), Nifty Mid Select (+1.12%), Nifty Midcap100 (+1.56%), Nifty Metal (+1.25%), Nifty Consumer Durables (+0.44%), Nifty Realty (+1.67%), Nifty CPSE (+0.93%), Nifty PSE (+1.93%), Nifty Oil & Gas (+0.74%), and Nifty Small Cap 100 (+2.36%). The notable losers were Nifty IT (-1.30%), Nifty Auto (-0.04%), Nifty FMCG (-0.23%), and Nifty Pharma (-0.71%).