Weekly F&O outlook: Bank Nifty must top 36,000 for Nifty to top 16,000; key support, resistances this week

By Sameet Chavan

It’s been more than a month now; our markets are trapped in a range. The point wise range for two key indices, Nifty and Bank Nifty is 500 and 1500 respectively. This certainly is a slender range considering the fact we are trading at much elevated levels. For the most part of June, we were confined to domestic triggers only; but as we stepped into a July month, the global factors started to influence our markets to a great extent. Unfortunately, global peers experience some sell off when Nifty is about to reach the milestone of 16,000 and on the other hand, some relief comes when we are at crucial support.

This certainly bodes well for the bulls but considering the recent trend, we are still not out of the woods yet. So rather than pre-empting and getting caught on the wrong foot, we would wait for Nifty to surpass the sturdy wall of 16,000. If this happens then the next immediate levels to watch out for would be 16,200 – 16,400. Although they may appear not so far from 16,000 levels, we would see good stock specific action in this period.

Now as we reiterate, if Nifty has to reach and surpass the magical figure of 16000, banking certainly plays a vital role here. It would be very important for the banking index to surpass the 36,000 mark, if we have to see benchmarks at new highs. Until then 35,000 – 35,500 are to be considered as intermediate hurdles. On the lower side, the cluster of supports for Nifty is placed at 15700 – 15550 – 15450 and for Bank Nifty, 34,200 – 33,900 are to be seen as make or break levels. Any sustainable move below the lower end of this support zone would reverse the short term trend in the downward direction. Traders should keep a note of it and position accordingly.

Let’s take a glance at the activity in the derivatives segment. PCR on Tuesday was well below 1, indicating an oversold position. It was mainly on the back of massive call writing, which was visible looking at the OI addition at 15700 strike. The market rebounded today and hence, lot of In-the-Money call writers ran for a shelter. Due to this, the PCR has jumped back to 1.18 which should be considered as a neutral territory. Now we are stepping into a monthly expiry with highest open interest in call at 16000 undoubtedly. Before this, there is a minor hurdle at 15800. On the flipside, 15500 put has maximum open interest which is also far from today’s close. Today, some decent writing was seen in 15700(put) and 15800 strikes (put), which should provide some support in the forthcoming session. Also, the INDIA VIX has spiked up a bit in last two sessions from its multi-year lows. It has cooled off again to enter the comfortable zone of sub-12.

Sameet Chavan is Chief Analyst – Technical & Derivatives, Angel Broking. Views expressed are the author’s own.