Nifty50 Crucial Level At 23000

Today’s Market Setup

Gift Nifty is slightly gap down by 30 points at 6:30 AM today morning. This suggests a potentially weak opening for the Indian markets. In the US, the Dow closed down 225 points, while the Nasdaq has closed higher by 6 points. At present, Dow futures and Nasdaq futures are in the green by 80 and 92 points respectively, indicating positive sentiment in the US markets.

Taking cues from Gift Nifty, Nifty50 is expected to open flat at yesterday's close, which is below its moving averages. The 10-day Daily Exponential Moving Average is placed at 23326, and the 20-day DEMA is at 23366 suggest a bearish trend in the short term.

For today's trading, we will have to consider support and resistance levels based on the conviction of call and put option writers. According to the option chain, there is strong conviction among put writers at 23000 and strong conviction among call writers at 23100. This data suggests that today's expiry is likely to be range-bound between 23000 and 23200.

Foreign Institutional Investors  are short in all segments of the market, indicating a bearish sentiment. The Implied Volatility remains neutral and has not shown any significant changes on a closing basis. This suggests that market participants are not expecting major price swings in the near term.

Any rise in the markets should be seen as an opportunity to sell. The market still remains in a "sell on rise" phase. On an immediate basis, yesterday's high can be considered as an immediate top for today's trading session.

On Wednesday, the Nifty Bank index concluded another volatile session while remaining confined within its established trading range. Two critical resistance levels: the 10-day exponential moving average at 49,681 and the 20-day exponential moving average at 49,625. These levels are likely to act as significant barriers for any upward movement in the index.

The current market structure suggests that traders should consider selling positions when the index approaches these resistance levels. This "sell on rise" pattern continues to dominate the Nifty Bank's behaviour, indicating a bearish bias in the near term.

FIIs have added short futures positions in both Nifty50 and Nifty Bank, indicating a bearish outlook on these indices. They have also added short positions in both puts and calls in Index options. This strategy, known as selling straddles or strangles, suggests FIIs expect limited movement in the indices. Additionally, FIIs have added long positions in stock futures, showing some bullishness in individual stocks. Overall, FIIs appear to be neutral to bearish on the broader indices.

Proprietary traders have booked profits in index futures, suggesting they believe the current trend may be nearing its end. They have added long positions in stock futures, indicating a positive outlook on specific stocks. In the options market, they are bearish, possibly hedging their long stock positions. The overall stance of proprietary traders seems to be neutral to bullish.

Retail and other clients are showing bullish sentiment across the board. They are bullish in index futures, stock options, and index options. This widespread optimism could be a reaction to recent market movements or based on their market analysis.

DIIs are bearish in stock options, which could be a hedging strategy for their equity holdings. They remain neutral in index futures and options, suggesting a cautious approach to the broader market direction.

Considering the mixed signals from various market participants, the overall setup appears to be neutral. While some segments show bullishness, others display caution or bearishness, creating a balanced market scenario.

Yesterday
Nifty50 opened with a gap down of 21 points at 23050, while Bank Nifty opened with a gap down of one point at 49402. This suggests a slightly bearish sentiment at the market opening.

Nifty50 faced intense selling pressure from the opening ticks, losing more than 200 points within the first 15 minutes of trade. As mentioned in yesterday’s report, the level of 22786 was identified as a crucial support level. Nifty50 made an intraday low of 22798, very close to this support zone. This proximity to the support level triggered buying activity, resulting in a V-shaped recovery that took Nifty50 to its intraday high of 23144. Profit booking occurred at this level, and Nifty50 finally closed the day at 23045. Only 26 out of Nifty 50 stocks closed the day in green, indicating a broader market weakness.

Nifty Bank traded in tandem with Nifty50 today. It also faced selling pressure from the opening ticks and lost over 700 points to hit its intraday low of 48734. Buying emerged in Nifty Bank along with Nifty, and it climbed to its intraday high of 49702. As mentioned yesterday, the 10-day DEMA placed at 49726 and the 20-day DEMA at 49641 were expected to act as resistance, which is exactly what happened. Bank Nifty faced rejection from these levels and closed the day at 49479. Only 8 out of 12 Bank Nifty stocks managed to close the day in green.

For the other sectoral indices, it was not a weak day overall. Except for Nifty Metal (+0.67%), all other sectoral indices closed the day in red. The notable losers were Nifty Mid Select (-0.66%), Nifty Midcap 100 (-0.26%), Nifty Auto (-0.74%), Nifty Consumer Durables (-0.48%), Nifty FMCG (-0.10%), Nifty Pharma (-0.51%), Nifty CPSE (-0.70%), Nifty PSE (-0.50%), Nifty Oil and Gas (-0.80%), Nifty Small Cap 1000 (-0.26%), Nifty IT (-0.56%), and Nifty Realty (-2.74%). This widespread decline across sectors indicates a bearish sentiment in the overall market.

Options Chain: (Nifty Expiry February 13)

Nifty50 (expiry today)
Today marks the expiry of Nifty50 Weekly Contracts. The option chain dated February 13 appears to be evenly balanced. Fresh put writing is observed at every level from 22500 to 23000, while fresh call writing is seen at every level from 23000 to 23500. This data indicates support and resistance from 23000 levels..

This balanced distribution suggests that the Nifty50 expiry should be very range-bound and subdued. As reported in our Wednesday report, 22785 is a crucial level, and Nifty did slip to its intraday low of 22798, taking support from there. Overall, the option chain appears neutral for today's weekly expiry bulls. The IV on the put side is 18.64 and 17.73 on the call side, indicating slightly higher expectations of downward movement.

Nifty Bank (Expiry February 27)
Not much has changed since Tuesday for Bank Nifty. There has been some call and put unwinding today at every level, which means traders are closing their existing positions. With 1.37 million put writing at 49000, this level will serve as support for Nifty Bank. Conversely, with 1.623 million call writing at 51000, this level will act as resistance for Nifty Bank.

The IV on the put side is 16.57 and 17.06 on the call side. The slightly higher IV on the call side suggests that traders are expecting a bit more upward movement potential in Nifty Bank compared to downward movement.

Support and Resistance
 - Nifty50: Major Support is at 22800 and Major Resistance is at 23500.
 - Nifty Bank: Major Support is at 49000 and Major Resistance is at 51000.
 - Sensex: Major support is at 76000 and Major Resistance is at 77000. 

Put Call Ratio and at-the-money
 - Nifty50: Overall 0.60 and at ATM 0.8 (Bearish)
 - Nifty Bank: Overall 0.8 and at ATM 1.18 (Neutral to Bullish)
 - Sensex: Overall 1.1 and at ATM 1.10 (Bullish)