F&O: Market in grip of option writers; weakness may persist
By Chandan Taparia
The Nifty50 index formed an inverted hammer on the daily chart, as it failed to hold its gains and corrected sharply towards the 9,500 level. The index closed with a marginal gain of 13 points after showing a negative streak in the last six sessions.
Now, if it sustains below the recent swing low of 9,480, then fresh selling may drag the index towards 9,450 and 9,420 levels, while on the upside, it has strong hurdles at 9,560 and 9,580 levels. Recently, the index broke below its consolidation band of 9,560-9,700 zone. As long as it does not get into the previous trading zone, the overall weakness may persist in the market.
On the options front, maximum Put open interest for the July series stands at strike prices 9,400 followed by 9,500, while maximum Call OI was seen at strike price 9,700 followed by 9,800. Options open interest remained scattered at different strike prices, being the beginning of a new series, but it signified the 9,400-9,700 band on a weekly basis.
India VIX fell by 5.07 per cent to 11.38. A lower VIX might again hold the market on decline.
Nifty futures closed flat to negative by 0.06 per cent on an expiry-to-expiry basis, as it settled at 9,504 compared with May close of 9,509. Option writers kept the market in a tight grip in the absence of any major trigger to drive the market rally.
Bank Nifty closed flat to negative after a volatile move between 23,124 and 23,476 levels on the June expiry day. It failed to surpass the immediate hurdle at 23,500 and lost all the intraday gains. It has to cross and hold above 23,333 to witness any bounce towards 23,500 and then 23,700 levels, while on the downside, support exists at the 23,000 level.
Bank Nifty closed flat to positive by 0.16 per cent on an expiry-to-expiry basis, as it closed 37 points higher from the previous expiry close of 23,190.
Long buildup was seen on select FMCG and metal counters while shorts addition was seen on the counters of Havells and select pharma stocks.
(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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Via:: Economic Times – Stocks