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F&O: Options activity & spurt in India VIX to cap upside for Nifty


By Chandan Taparia

The Nifty50 index opened with a gap up on Wednesday but failed to hold the gains and corrected sharply towards 10,440 level. It witnessed selling pressure in the resistance zone between 10,650 and 10,700 and corrected by around 250 points from its intraday high.

The index formed a Bearish Engulfing pattern on the daily scale, which indicated that the bears are again pushing the market from higher levels. If it fails to surpass the immediate resistance in the 10,550-10,600 zone, then prof it booking may take it towards its next support at 10,350 level.

The price setup at current juncture suggests the index may remain volatile as after the recovery of 500 points from the recent swing lows, it is again finding hurdles at key resistance area.

On the options front, maximum Put open interest was at 10,000 followed by 10,400 while maximum Call OI was at 11,000 followed by 10,700. There was meaningful Call writing at 10,700 followed by 10,500 while Put unwinding was seen at all immediate strike prices. The option band signified a trading band between 10,300 and 10,600 levels.

India VIX moved up 3.51 per cent to 17.98. A spurt in volatility after the dips in last four sessions suggests the upside could again get restricted in the market.

Bank Nifty opened positive, but failed to cross the 26,000 level and corrected sharply towards 25,100. It formed a long bearish engulfing candle on the daily scale, which suggests are the bears are putting pressure at higher levels. As long as it holds below 25,500 level, Nifty can drift towards its next support at 25,000 and then 24,650 levels, while on the upside, a hurdle is seen at 25,650.

Nifty futures closed in the negative with a loss of 1.36 per cent at 10,445. Longs were seen in NIIT Tech, UBL, Infosys and Coal India while shorts were seen in DHFL, Indiabulls Housing Finance, Havells, Canara Bank and L&T Finance.

(Chandan Taparia is Technical & Derivative Analyst at Motilal Oswal Securities. Investors are advised to consult financial advisers before taking an investment calls based on these observations)

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