Rajesh Palviya, VP – Technical and Derivative Research at Axis Securities, feels the Nifty50 is now headed towards 18,500, followed by 18,700. “If Nifty manages to close above 18,700 in the coming week, the probability of it hitting 19,000 will surely increase.”
Palviya, who has been tracking the equity markets since 2001, said in the weekly expiry of October 21 for Bank Nifty, the high open interest concentration on the Call side is seen at 40,000 strike with almost 40,000 contracts and writing of 24,650 contracts, strongly signaling that Bank Nifty is likely to touch this level (40,000) in the coming week and may find resistance also. “The stocks which can drive the index are HDFC Bank, IndusInd Bank, ICICI Bank, and SBI.”
Edited excerpts:
Q: What does the weekly expiry indicate about the market trend in the coming week? Will the Nifty50 hit 18,500 or 19,000 by Diwali, considering the current momentum?
Nifty has closed at an all-time high on a weekly basis, closing well above the crucial psychological level of 18,000 and is now headed towards 18,500 & above that 18,700. The options data of weekly expiry scheduled on October 21 also augments the same view as it has high open interest concentration on Call side at 18,500, 18,700 & 19,000 and while on the Put side high open interest concentration is seen at 18,100 & 18,000.
Lowering of India VIX and ATM implied volatilities also suggests that the current uptrend in the market is here to stay as there is not much apprehension among market participants. As per the provisional data writing to the tune of 13.25 Lakh shares and 12.30 lakh shares has been seen at 19000 & 18700 Call strike indicating a probable resistance zone.
On the Put side, it is witnessed at 18300 & 18100 to the tune of 15.78 lakh shares & 12.86 lakh shares, indicating strong support at these levels. If in the next week Nifty manages to close above 18,700, the probability of it hitting 19,000 will surely increase.
Q: What does the open interest and PCR data indicate? Also, what does the open interest and PCR mean for the common man?
In the current series, we notice that Nifty has seen a Long Build Up with price gains of 3.1 percent and open interest gain of 13.61 percent till Wednesday. The addition of 16.62 lakh shares, increasing from 122 lakh to 138.69 lakh shares, indicates that overall bias is very positive, and more additions in the position will further a strong up move in coming sessions. The sentiment indicator used by traders, i.e., PCR or PUT CALL Ratio is currently at 1.45 indicating the overall bias is likely to be on the positive side.
Open interest simply means the total number of outstanding contracts held by market participants at the end of each day. When prices of any stock or index move up or down and there is an addition of open interest it means that new money is flowing into the stock asserting the current trend, eventually helping the trader to decide and understand the current trend. While decreasing open interest means that the market participants are either booking profits or exiting the positions as the trend has changed.
PCR or Put Call Ratio is a ratio calculated by dividing Total open interest of Puts by the Total number of Calls of particular stock or Index to gauge the sentiment. It’s a general convention that high PCR (1.70 and above) indicates bearishness, while lower levels (0.70 and below) indicates Bullishness. However, it should be kept in mind that PCR alone won’t fetch the correct picture of the market, while it can be used as a tool but the conclusion can be drawn only after taking into account other Derivative parameters.
Q: What is your reading on FII data in the futures & options segment, and what is the trend indication from the data?
FIIs in Index futures have been net on the Long side in current expiry, although the quantity has reduced compared to August & September expiry. In the options segment, too, the phenomenon is the same overall, indicating that some profit booking has taken place at higher levels.
Q: What are the sectors and stocks to watch out for in the coming week?
We expect the Banking, Auto, Power, Textile, and Real Estate sectors can do well in the near term.
Q: Midcap and Smallcap indices consistently outperformed front liners. Will the outperformance continue in the coming weeks too?
We expect Midcap and Smallcap likely to continue the current momentum as they are making higher highs with increased volumes. Market Breadth has improved significantly, which indicates a strong uptrend. With more & more positive news flows and better quarterly results, the overall performance is most likely to draw more attention from market participants in both these sectors.
Q: Will the Bank Nifty cross the 40,000 mark by Diwali? What are the stocks that can drive the index towards 40,000?
With Bank Nifty sustaining above its immediate resistance zone of 38,500, the probability of the index hitting 40,000 has increased. In the weekly expiry of October 21, too, the high open interest concentration on the Call side was seen at 40000 strike with almost 40,000 contracts and writing of 24,650 contracts, strongly signaling that Bank Nifty is likely to touch this level in the coming week and may find resistance also. The stocks which can drive the index are HDFC Bank, IndusInd Bank, ICICI Bank, and SBI.
Q: Crude oil prices hit the high of October 2018. Will it cross $ 90 a barrel in the coming weeks?
The overall trend in the recent past in crude oil has been on the upside and is likely to continue in the same direction unless and until on a weekly basis it does not close and sustain below $ 75 levels. The International Energy Agency in their monthly report mentioned that demand will outpace supply until at least the end of 2021. As restrictions across all the major economies are being lifted post-Covid vaccination, there is an increase in commercial activities.
So if OPEC does not increase its output, we cannot rule out the probability of crude oil touching $ 90. Currently, Crude has been trading well above its 20, 50, 100, and 200-day simple moving averages, and also the momentum indicator RSI is above 75+ indicating an uptrend in the prices.
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