By Ruchit Jain
Post the gap-up opening on last Friday, our markets have traded within a narrow range throughout this week and have ended the weekly expiry session tad below 18350. The cues from the global markets and the derivatives data remains positive as global equities are continuing their upmove post the recent correction in the U.S. Bond yields and the Dollar Index. Our markets too have not seen any short formations as of now and existing longs are still intact. Only worry seen for the markets is the divergence in the market breadth as there’s no broad market participation inspite of index nearing to record highs.
If we look at the derivatives data, the long positions formed at the start of the November series in both indices are intact. FII’s have traded with a positive bias and have 64 percent long positions in the index futures segment. They have been buying in the cash segment too and have bought equities worth Rs 13500 crores in this calendar month so far. Their buying activity in the cash segment along with the long formations in the futures segment hints at a positive bias. On the other hand, the Client segment too has been riding this trend with a ‘Long Short Ratio’ at 56 percent.
In options segment, the November options data hints at resistance in the range of 18400-18500 as there’s significant open interest build-up in call options of these strikes. Amongst put options, 18000 strike has the highest open interest followed by 18300 which are the immediate supports. The trend for the index remains positive till it holds its important support of 18000. Hence, any intermediate declines before the monthly expiry could witness
buying interest at lower levels.
Although the midcaps have been participating, the index heavyweights have been in driver’s seat and led the benchmark higher. It would be crucial to see whether the call options writers of 18400-18500 strikes unwind their positions and if such unwinding is seen, then the Nifty could register a new record soon. Hence, traders are advised to keep a buy-on-dip approach till the trend is intact and also keep a tab on the existing open interest.
(Ruchit Jain is the Lead – Research at 5paisa.com. The views expressed are the author’s own. Please consult your financial advisor before investing.)