When the market opens on August 10, Nifty will be confined to a tight range with the 25,000 level acting as both a technical and psychological hurdle. The constructive nature of the broader trend is there, but a steady India VIX, options positioning and the Put-Call Ratio all point to a period of consolidation. The question is whether 24,800 can be cleared with any conviction.
The index gave back 0.27 percent on August 7 and ran into a narrow band after putting in a new swing high earlier in the week. In the view of experts, the bias only turns higher once there is some traction above 24,800 to put 25,000-25,200 in play. Should that not happen, the 24,400-24,300 layer should serve to cushion any selling.
Why 25,000 matters for Nifty now
There is a supportive mid-term backdrop to the market. The Nifty 50 has been able to stay on top of its key moving averages, the 23.6 percent Fibonacci retracement from the last rally and the July 7 swing high. But momentum has been muted of late, more of a pause than a pivot.
Nandish Shah of HDFC Securities sees 24,770 as the first thing to get out of the way before the 25,000 threshold. He has the 24,430-24,380 area marked down as where support will come in if profit-taking sets in. His read on the primary trend is still bullish so long as the index holds above the major moving averages.
You would find Sudeep Shah of SBI Securities in agreement. He notes that while momentum has flattened over the last three sessions, the underlying structure is unharmed. With the medium-term setup positive, he expects dips near support to be bought and says a firm move over 24,770 could see another go at 25,000.
Derivatives positioning signals a ceiling and a floor
Current levels are something of a contested battlefield on the weekly options board. The Call side has the most open interest at the 24,600 strike, 1.19 crore contracts, ahead of 25,000 with 1.13 crore and 24,700 with 1 crore. There was also fresh Call writing at 24,600 to the tune of 64.48 lakh contracts.
Additions at 24,550 and 25,000 were 28.04 lakh and 25.2 lakh contracts. Unwinding was heaviest at 24,200, down 1.79 lakh, with 24,300 and 24,250 seeing reductions of 1.01 lakh and 49,855 respectively. It all points to supply overhead and a pivot in the 24,600-24,700 region.
For Puts, the 24,600 strike is top of the list with 76.51 lakh in open interest, then 24,500 at 73.24 lakh and 24,200 at 65 lakh. The heaviest writing was at 24,500 with 14.99 lakh added, followed by 24,550 (10.08 lakh) and 24,200 (7.97 lakh). At 24,700 there was major unwinding of 20.95 lakh contracts.
A drop in the Put-Call Ratio to 0.89 on August 7 from 1.04 the session before is in line with near-term indecision under 25,000. By the numbers, a PCR in the vicinity of 1 or above 0.7 is bullish, but a slide towards 0.7 or 0.5 is a sign of caution.
Volatility and breadth set the tone
India VIX was unchanged at 12.16, which is benign. Being below the short-term moving averages and the 14 mark, it is a number that favours the bulls and speaks to stability. Risk appetite is likely to hold even in sideways markets so long as VIX does not breach 14.
One can see pockets of resilience in the price action. The Nifty 50 made a gap-down start but put in a small-bodied bullish candle with an upper shadow, keeping it within Tuesday’s range for the third day running. It is also tracking above a trendline that had been sloping down and is now offering support.
The tape across the futures universe has been mixed if active. Breadth indicators showed a build-up of longs in 43 stocks and long unwinding in 50 others. There was a measure of offsetting flow in the market as it digested its gains: 68 stocks put in short build-up while 49 were seen with short-covering.
To give some pre-open perspective, here are the signals on traders’ minds today:
– VIX is steady and supportive at 12.16
– PCR has come down to 0.89 from 1.04
– Nifty is held under 24,800 for the time being, with support in the 24,400-24,300 area
Bank Nifty watch: a test of bull leadership
Any breakout is contingent on banking shares. After a tight session on Friday, the Bank Nifty put in a 0.56% gain to close over 58,000. While the medium-term view among analysts is constructive, near-term indicators suggest a period of consolidation ahead.
Sudeep Shah has the first resistance band at 58,500-58,600. Should that be put to the side, momentum could return with an eye on 59,100 and then 59,600. On the other hand, he would look for firm footing near the 290-day EMA in the 57,600-57,500 range on any pullback.
The options book on the monthly series of Bank Nifty is instructive. Maximum Call open interest is at 58,000 (22.95 lakh contracts), with 59,000 and 58,500 next in line at 11.66 and 7.83 lakh respectively. The most active Call writing was at 58,500 with an addition of 1.33 lakh, followed by 59,000 and 58,600. Unwinding was evident at 58,100 where 39,690 contracts were shed, as well as at 58,000 and 57,600.
Puts tell a similar story. The 58,000 strike has the most open interest at 16.6 lakh, though 58,300 led Put writing with 6,180 contracts. The 58,000 also saw the heaviest Put unwinding of 1.07 lakh. All of this points to a tight zone around 58,000 where buyers and sellers are vying for control.
Key levels for the day
The Nifty 50 is at 24,571. One will see consolidation so long as the index stays under the 24,700-24,800 belt; a move in excess of 24,800 would make 25,000-25,200 accessible. For a dip, 24,400-24,300 is the support, with 24,430-24,380 also flagged. Pivot data offers further reference points for institutional flow at the cash open or after lunch: resistances at 24,616, 24,641 and 24,682 against supports of 24,534, 24,508 and 24,467.
On the Bank Nifty at 57,746, pivots mark resistance at 57,927, 57,999 and 58,117, with support at 57,692, 57,619 and 57,501. Fibonacci suggests 59,247 and 61,787 for upside and 57,305 and 56,441 below. These are useful to have in mind when framing risk.
Underneath the surface both indices show strength, trading above their short-term moving averages and, in the case of the Bank Nifty, the 200-DMA which has been a reliable support on a closing basis. This is digestion, not deterioration.
F&O ban and delivery
Kaynes Technology India has been added to the F&O ban list, joining Bandhan Bank and LIC of India. Nothing was taken off. Such bans are triggered when derivative positions go beyond 95 percent of the limit, whereas high delivery figures are more a sign of investment than short-term churning.
The question now is whether 24,800 gives way early. A holding action there may embolden momentum for a run at 25,000, albeit with friction from Call interest. If the sellers stand their ground, dip buyers should be found near 24,400-24,300.
Ultimately the strategy is plain. Bulls require a clean break to put the market in a higher gear; bears have a thick options wall to work with. With the VIX subdued and breadth in play, expect the next directional move to be quick once the range breaks.
