Market at days high; 14,500 Put option sees massive addition in open interest

Update: The Indian benchmark indices have staged a scintillating recovery as Nifty trades in green terrain while Sensex is down by a meagre 26 points. 

Nifty has reclaimed the 14,600 mark while Sensex was trading above the mark of 48,750. Around 33 stocks from Nifty 50 were trading in green. The broader markets were also trading in green with Nifty Mid-cap and Small-cap gaining 0.17 per cent and 0.94 per cent, respectively.   

On the options' front, the 14,500 Put option has seen a massive open interest addition in today’s session as it added a 20.74 lakh share in the open interest. With this, the total open interest concentration in 14,500 Put option has reached 39.26 lakh. On the call option side, the 14,500 Call option has added 14.63 shares in the open interest, followed by the 15,000 Call option, which has added about 9.38 lakh shares in the open interest.   

Indian markets have recovered from the intraday low levels, led by buying interest visible in metal, FMCG and auto stocks. Nifty Metal index was up by 1.3 per cent, followed by Nifty FMCG and Nifty Auto, which were up by 0.82 per cent and 0.6 per cent, respectively.  

The advance-decline ratio is tilted in favour of advancers. A divergent trend has been witnessed in the broader markets with Nifty Mid-cap trading in red, down by 0.41 per cent while Nifty Small-cap was up by 0.42 per cent.    

Among the stock-specific action, KPR Mill, Marico, Eid Parry, Persistent, Gujarat Ambuja Exports, and Carborundum Universal have hit a new 52-week high in today’s session. 

Markets kicked off the last week on a firm note and with time, it went from strength to strength and before anyone could realise, Nifty reclaimed its important psychological mark of 15,000 while Bank Nifty also went past the 34,000 mark. 

Just when it seemed that the markets were trying to break out of the broad range of almost two-month-long consolidation, the market participants were convinced that the party on D-Street will continue. Unexpectedly, we saw a big sell-off on Thursday’s high, which continued on Friday as well and eventually, dragged Nifty close to 14,600 mark. Despite this, the week ended with net gains of 2 per cent.  

Overall, the market seems to be in a hallucinatory mode as it first caught bears on the wrong foot, and now with the tail end correction, the bulls are completely baffled. This was depicted quite well in the price structure as the pattern analysis shows that the index stays inside the channel, which it had formed on the weekly scale.  

Technically, the index has retraced almost 50 per cent of its prior upswing, which had begun from the lows of 14,151 and with this, it erased gains of the preceding two trading sessions and closed below the bullish gap area (14,667-14,694). As the index has managed to close below this gap, it seems to have reestablished bearish sentiments in the near term.   

Now going ahead, the zone of 14,450-14,500 is a key area to watch out for the bulls as the 100-DMA and 61.8 per cent retracement of the current upmove is placed in this region. As long as the bulls manage to stay above this level, we can see buying interest at lower levels. A breach of this support level could open gates for a further correction towards 14,240 and 14,150 levels in the near term. Meanwhile, on the upside, 50-DMA (14,783) is likely to act as an immediate resistance level for the bulls.  

It’s important to see how the action unfolds in the first trading week of May as the outcome of states' election, vaccination drive for 18+ and COVID-19 cases would be watched closely by the market participants, and this could also be a deciding factor for the markets in the coming days. 

Along with this, another important factor to watch out for is the flows from FPIs. FPIs snapped their six-month buying spree as they turned net sellers in the month of April and pulled out Rs 12,039 crore from Indian equities. Meanwhile, DIIs turned net buyers for the second consecutive month in April.  

May is here and so is the famous adage back on the front page - ‘sell in May and go away’; will this theory hold true? In the last 8 years, the index had ended the month of May with a negative return only once and that too, in the year 2020. Hence, it would be interesting to see whether negative returns continue for the second consecutive year or the bulls dominate after weathering the storm of April.