Volatility may zoom on weekly options expiry; 15,000 is a strong support for Nifty

Nifty started the session with a loss and soon after opening, selling pressure got intensified. The index managed to recover from the early setback and traded near the flat line. However, this pullback from the lower levels attracted fresh selling and dragged the index to fresh intraday lows of 15,170. In the end, Nifty ended at 15,209 levels, down by 104 points.   

The broader markets, however, bucked the trend and ended in green with Nifty Mid-cap and Small-cap adding 0.31 per cent and 0.03 per cent, respectively.   

The price action of the day formed a bear candle, carrying lower high & lower low as compared to its prior bar. The first signs of weakness are visible on the charts, as Nifty had closed below the previous day’s low and also, below the 5-EMA. Further, the 5-EMA has begun to trend down. And, if we look at the options data, the maximum contraction of OI on the call side in the initial part of the week was at 15,500. However, this has gradually shifted to 15,400 and now to 15,300 levels. Additionally, another data point, which is worth noting is the strikes of 15,300, which saw a maximum call writing, followed by 15,200 level. The PCR also declined to 0.72. A declining put-call ratio during a downtrend market is a bearish indication and it means that option writers are aggressively writing the calls option strikes.   

Hence, the above factors make us believe that Nifty may remain under pressure on the weekly options expiry, and we may expect the expiry to be in between the range of 15,000-15,300. The level of 14,977-15,000 is a crucial support for the index as last week’s low is placed at 14,977 while the maximum put OI concentration is at 15,000 levels.