Broader market outperforms; 15,700 PE option sees massive addition in open interest

Market update at 12:40 PM: Maintaining its morning gains, Nifty was seen trading up by 0.38 per cent during the afternoon session. 

Nifty logged a fresh all-time high of 15,739.40 on Monday. The broader market has outperformed the frontline indices with Nifty Midcap 100 and Smallcap 100 inching higher by 1.20 per cent and 1.45 per cent, respectively.   

Cues from the options data show that the level of 15,700 is a significant level to watch out for. The maximum open interest concentration on Call & Put side is seen at this strike. Interestingly, more than 25 lakh shares have been added in 15,700 Put option in today’s session itself. On the other hand, over 12 lakh shares have been added to the 15,700 Call option today.

Market Update: 10:15 AM: The Indian markets were trading higher on Monday with Sensex and Nifty trading above the mark of 52,150 and 15,700, respectively. 

Around 40 stocks out of Nifty 50 were trading in green. ICICI Bank, L&T, ITC, Tata Motors, and Axis Bank emerged as the top contributors to Nifty.  emerged as the top contributors to Nifty. On the other hand, Bajaj Finance, HDFC, and Bajaj Finserv were the top draggers.   

Interestingly, India VIX has slumped more than 5 per cent and is hovering around the 15-mark.   

Talking about the sectoral performance, a majority of the sectors were trading in green with Nifty Energy and Nifty Auto being the top gainers.  

Among the stock-specific action, Adani Power has jumped nearly 19 per cent and recorded a fresh 52-week high.   

The bull run on D-Street continued for the third consecutive week with the help of the broader market as well as the PSU banks. The drop in Coronavirus cases, RBI Policy, and encouraging May jobs report in the US, further aided the bulls during the last week.   

Nifty scaled to a new record high during the last week. It gained 1.52 per cent and ended above the 15,650 mark. The broader indices closed in green i.e. Nifty Midcap-100 jumped 3.3 per cent while Smallcap-100 gained 2.4 per cent. Barring Nifty IT index (ended down by 0.46 per cent), all other sectoral indices performed well. The realty and metal indices advanced by 6.69 per cent and 5.61 per cent, respectively.   

The volatility index i.e. India VIX slumped nearly 8.5 per cent. After dropping below 16, India VIX is back to its pre-COVID levels.  

On the weekly scale, Nifty has formed a bullish candle, which reflects the directional consensus that prevailed throughout the week among the market participants. As the benchmark index is placed in uncharted territory, there is no visible resistance. Hence, it would make sense to read out what option data is indicating in terms of determining the resistance point.   

So, if we go by the options data, the highest call option concentration is at 15,700 Call strike; thus, this level is likely to act as an immediate barrier in the near term. Among Put strikes, the highest Put base is placed at 15,500 strikes; hence, we can consider a band of 15,430-15,500 as a strong support level.  

A close above the level of 15,700 would open gates for 15,900-16,000 levels in the medium term. Meanwhile, failure to get past this resistance would result into a time-based consolidation wherein, Nifty could take support around the above-mentioned support range. 

These are not bearish signs on charts; however, some signs of exhaustion are visible on the indicator. The histogram shows that the momentum is declining for the last five days, though the index is moving higher. The positive directional indicator, +DMI was also flattened during the last week. The weekly RSI is at 67.99 and it is nearing the overbought zone.