With Nifty50 Breaking Its 8-Day Of Losing Streak, Markets Are In A Mood To Consolidate.

Gift Nifty is showing a gap up of 25 points at 6:30 AM today morning. US markets were closed yesterday. Asian markets are trading flat with Nikkei 225 up by 54 points, Hang Seng down by 4 points, and Kospi down by 4 points. At present, DOW futures are trading higher by 63 points, and Nasdaq futures are up by 28 points. Taking cues from Gift Nifty, Nifty50 will likely open flat at around yesterday's close.

Nifty50 had given a positive close after 8 trading sessions, indicating a potential shift in sentiment. Both Nifty50 and Nifty Bank closed yesterday at or near the intraday high of the indices. The data suggests that today should be range-bound. The range for Nifty50 will be between 22800 and 23200, and for Nifty Bank, it would be between 49300 and 50000. Implied Volatility has climbed to 15.72, which is over our comfortable level and can play a spoilsport, potentially increasing market uncertainty.

Today is the expiry of Sensex weekly contracts, which may cause some volatility. Any move of Nifty50 above 23050 can trigger a short covering to take Nifty up to the 10-day Daily Exponential Moving Average placed at 23166. This is also the zone of the 23000 level call writers. Any break of 22900 will once again take Nifty50 down to test the important level of 22786. Though there are 1.5 million extra call options over put options at level 23000, a keen watch needs to be kept on this level. The bears and bulls are jostling for resistance and support.

The entire bias of the FIIs is on the bearish side. The level 22786 has been tested on January 27, February 12, February 14, and again yesterday. How long can this level hold? Continuous hammering at this will break this level. Any rise in the markets till 10 DEMA will be an opportunity to sell. It still remains a sell-on-rise market.

Nifty Bank, after a volatile session, has not been able to break the range. As reported in our report yesterday, the conviction of put writers on the 49000 level was very strong. This level is now the bottom of Nifty Bank as of now. The 10 DEMA placed at 49478 and 20 DEMA placed at 49524 are still resistance levels. With 1.258 million put options, 49000 is the support, and with 1.303 million calls options, 50000 is the resistance. 

If today's trend continues and follow-up buying is witnessed in the market, one should wait and watch the price action at the 10 and 20 DEMA. If the rally fails at these levels, then a sell-on-rise market continues. If Nifty Bank rallies and gives a good bullish candle above these levels, then a trade can be initiated with these levels as a stop loss. 

Foreign Institutional Investors have added some long futures in Nifty and Bank Nifty, indicating a slight positive sentiment in these indices. However, FIIs have sold a small quantity of call and put in index options, suggesting a more cautious approach. FIIs have also added longs in Stock Futures, showing confidence in specific stocks. Overall, FIIs are bearish in indices and options reflecting a generally negative outlook.

Proprietary desk traders have added a small quantity in Index Futures and increased longs in Stock Futures, indicating some positive sentiment. However, they are bearish in Options and bearish overall, suggesting a mixed approach with a tendency towards caution.

Clients, likely retail investors, are bullish in index futures, stock and Index Options. This bullish stance across multiple segments indicates an optimistic outlook among individual investors. Clients are bullish overall, possibly driven by short-term market movements or positive sentiment.

Domestic institutional investors are bearish in stock options, suggesting caution in individual stock performance. They are neutral in index futures and options, indicating a balanced approach to broader market movements. Overall, DIIs maintain a neutral stance, neither overly optimistic nor pessimistic.

The overall market setup is bearish, likely due to the bearish stance of FIIs and proprietary desk traders, despite the bullish sentiment among clients. This divergence in sentiment among different market participants suggests a potentially volatile market environment.

FIIs have added some long futures in Nifty50 and Nifty Bank. FIIs have sold a small quantity of calls and puts in index options. FIIs have added longs in stock futures. FIIs are bearish in Indices and options.

Proprietary desks have added a small quantity in index futures, added longs in stock futures, and are bearish in options. They are bearish overall.

Retail investors are bullish in index futures, stock options, and index options. Clients are bullish overall.

DIIs are bearish in stock options and are neutral in index futures and options. DIIs are neutral.

The overall setup is bearish.

Yesterday
Upward reversal in PSU banks

Nifty50 opened gap down 119 points at 22089 and Nifty Bank opened gap down by 219 points at 48880. In the initial trades, selling pressure was seen and Nifty50 broke the important level of 22786 to dip to its intraday low of 22727. Buying interest emerged at this level to take Nifty50 to its intraday high of 22974. We had said, on Monday, that 22900 was a key level. A struggle to gain control of this level was witnessed between the bulls and bears throughout the day. 

Nifty50 also gravitated around this level for most of the day; in the last 2 hours, the bulls were able to wrest control of this level and pushed Nifty50 higher to its intraday high of 22974 and finally to close the day at 22966 near the day's high. The level of 22786 is such a huge demand zone that despite the best efforts by the bears, bulls managed to regain this level and closed above it. The other main plus point is that Nifty50 closed the day at the higher point of the day. Now we have visited this level of 22786 four times, and this level is being severely tested. Among Nifty 50, 34 stocks closed in the green. 

Nifty Bank also traded in tandem with Nifty50. Selling pressure was witnessed in the opening trades, which took Nifty Bank to its intraday low of 48530. As mentioned yesterday, the conviction of put writers was very strong at 49000. With this conviction of the put writers, Nifty Bank rebounded to the intraday high of 49314 and finally closed at 49258, nearly the day's high. It is a great plus for the Nifty Bank to close the day at the high point of the day, but we will have to wait and watch tomorrow if there is any follow-up buying. 

There is a definite reversal in PSU banks. HDFC Bank (+1.33%), IndusInd Bank (+2.33%) and State Bank of India (+0.77%) led the rally in Nifty Bank. Seven of 12 Nifty Bank stocks close in the green.

It was a good day for the other sectoral indices. The notable gainers were Nifty Mid Select (+0.75%), Nifty Midcap 100 (+0.39%), Nifty Metal (+0.77%), Nifty Pharma (+1.27%), Nifty Consumer Durables (+0.82%), Nifty CPSE (+0.98%), Nifty PSE (+0.61%), Nifty Oil and Gas (+0.70%), Nifty Small Cap 100 (+0.04%). The notable losers were Nifty Next 50 (-0.19%), Nifty IT (-0.58%), Nifty Auto (-0.53%) and Nifty FMCG (-0.36%). 

Options Chain

Nifty50 (expiry February 20)
Aggressive put writing is seen at every level from 22500 till 23000. Similar call writing is

observed at every level from 23000. With a total of 4.496 million call options, 23300 level is still the immediate resistance. The option chain is very evenly placed with even number of call and put options. Meaningful resistance is seen at every level from 23000 and similar support is seen at every level from 23000. 23000 will the level to watch out for tomorrow. On the lower side 22800 gives immediate support. The PCR has also risen to 0.8 and still is in an oversold zone. The IV at the put side is 18.03 and is 19.14 on the call side.

Nifty Bank (expiry February 27)
There has been a lot of put writing at every level 48500 till 49300 level. Some call unwinding is observed at every level from 49300 onwards till 50000. The conviction of the put writers is much more than the call writers. With 1.307 million put options written at 49000, it will be the support for Bank Nifty and with 1.332 million call options written, 50000 will be the resistance for Nifty Bank. The IV at the put side is 17.49 and is 20.83 on the call side. Nifty Bank should range between 49200 and 50000.

Support and Resistance
 - Nifty50: Major support at 22800; major resistance at 23300.
 - Nifty Bank: Major support at 49200; major resistance at 50000.
 - Sensex: Major support at 75000; major resistance at 76500.

Put-call ratio and at-the-money
 - Nifty: PCR overall 0.80; ATM 0.88 (bearish)
 - Bank Nifty: PCR overall 0.7; ATM 0.86 (bearish)
 - Sensex: PCR overall 1.00; ATM 1.06 (neutral to bullish)

 

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