Markets

F&O: India VIX needs to fall below 13 for next leg of rally

By Chandan Taparia

Nifty index formed an inside bar, as it traded inside the trading range of the last session. It failed to surpass previous day’s high of 10,420 and corrected towards 10,346 levels.

The index has been finding multiple hurdles near 10,440 zones, while a hold below 10,333 could start a decline towards 10,276 then 10,200 zones.

The 50-share NSE index has seen a recovery from 10,141 to 10,478 in the recent up leg, and if immediate support is not respected then bounce back could fizzle out. However, price structure suggests consolidation with limited upside in the market.

On the option front, maximum put open interest is at 10,000 followed by 10,400 strikes, while maximum Call open interest is at 10,500 followed by 10,400 and 10,700 strike.

We have seen marginal Put unwinding at all immediate strikes, while intact Call writing was seen at 10,500 followed by 10,400 strike, which is restricting index’s upside move. Option band signifies a trading range between 10,250 to 10,500 zones.

India VIX fell down marginally by 0.22 per cent to 14.33. Volatility needs to decline below 13-13.50 for market to extend its recent bounce back move.

Bank Nifty failed to surpass 24,950 zones and corrected towards 24,750 zones. It formed a small spinning top candle on the daily scale, while 25,000-25,100 zone is likely to act as a multiple hurdle for the index. Now if it sustains below 24,750 then weakness could be seen towards 24,500 then 24,350 levels.

Nifty futures closed with a loss of 0.57 per cent to 10366. Built up of long position were seen in NIIT Tech, Mindtree, Shriram Transport Finance, Jubilant FoodWorks, Asian Paint, Divi's Laboratories, Bata India and Havells while shorts were seen in Amara Raja Batteries, ONGC, Reliance, Vedanta, IGL, L&T, Torrent Pharmaceuticals, Motherson Sumi and ICICI Bank.

(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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