F&O: Bears take complete control of D-Street; volatile swings to continue

F&O: Bears take complete control of D-Street; volatile swings to continue

Nifty opened gap down on Wednesday and selling pressure dragged the index below the psychologically important 14,000 mark. The index slipped and touched an intraday low of 13,929 level and eventually closed at 13,967 with a loss of 271 points. The index continued to form lower top and bottom for the third straight session. Nifty also formed a Bearish Belt Hold sort of candle, indicating that the bears had complete control over the market through the session.

Nifty may continue to remain highly volatile ahead of Thursday’s monthly F&O expiry and next week’s Union Budget. Now, as long as Nifty remains below 14,200 level, every bounce can be sold into and weakness may be seen towards 13,800 level, while on the upside key hurdle exists at 14,200 and 14,350 levels.

India VIX moved up 4.96 per cent from 23.24 to 24.39 levels. A surge in volatility due to selling pressure ahead of Budget 2021 could keep the market volatile with limited upside potential.

On the options front, maximum Put open interest stood at 13,500 level, followed by 14,000, while maximum Call OI stood at 14,700 followed by 14,500 levels. Call writing was seen at 14,100 and then 14,200 levels, while there was Put writing at strike prices 13,900 and 13,500. Options data suggested an immediate trading range between 13,800 and 14,200 levels.

Bank Nifty opened flat but failed to hold the 31,250 level and tumbled sharply below 30,200 level by breaking its 50 DMA in the latter part of the day. Selling pressure was seen across all banking stocks and the index closed with a loss of around 900 points. The index formed a bearish candle on the daily scale and has been making lower top and bottom from the last three sessions. As long as the index remains below 31,000 level, every bounce can be sold into for downside move towards 30,000 and 29,500 levels, while on the upside, hurdles are seen at 31,250 and 31,500 levels.

Nifty futures closed negative at 13,982 level with 1.90 per cent loss. The trade setup looked positive in UBL, Nalco, Cummins India, Wipro, McDowell, ITC, HCL Tech and Cipla but weak in LIC Housing, DLF, Titan, IndusInd Bank, Hindalco, Jindal Steel, Asian Paint, HDFC, Tata Chemicals, Bata India, RIL and Jubilant Foodworks.

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

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