Experts said the market looks directionless at the moment, but in all probability the expiry should happen in the 7,800-7,900 range.
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NEW DELHI: The Nifty50 reversed gains on Monday and closed a tad below its crucial psychological level of 7,850, reflecting nervousness on Dalal Street ahead of the expiry of November series F&O contracts on Thursday.
Experts said the market looks directionless at the moment, but in all probability the expiry should happen in the 7,800-7,900 range. The 7,800 level on the Nifty50 will act as a crucial support for the index. If it breaches this level, it may head towards 7,700.
“The Nifty50 futures witnessed directionless trade as both the bulls and bears were fighting to get their grip on the market. It needs to hold above 7,850-7,860 levels for a bounceback move to continue towards 7,920 and 7,950 levels,” said Chandan Taparia, Derivatives & Technical Analyst - Equity Research at Anand Rathi Financial Services.
"However, if it fails to hold above 7,800 level, then the index may come under pressure and decline towards the next support at 7,750 and 7,725 levels,” he said.
Experts said the 7,800 level would be a key support for the index in case the market starts moving southward, with the maximum concentration of put open interest (OI) at 42.45 lakh contracts. In case it breaches 7,800, then the 7,700 level will be a crucial support for the index.
Open interest is the total number of outstanding contracts that are held by market participants at the end of each day.
Call writing was seen at strike prices 7,900 (adds 6.75 lakh contracts) and 8,000 (adds 6.27 lakh contracts). The maximum concentration of Call OI at was seen at strike price 8,000 with 65.65 lakh contracts, followed by strike price 7,900 with an OI of 48.43 lakh contracts.
“Creation of speculative longs in Nifty50 futures along with Call writing indicates expectation of neutral to positive move during expiry. However, with more shorts than longs this expiry, a higher rollover percentage would indicate the willingness of carry forward positions,” said Bhavin Desai, Head of Derivative Research, Motilal Oswal Securities.
"Over the next two sessions, though, we may see tiny bounces in many short-heavy stocks and in Nifty50 as well,” he said.
Nifty50 November futures closed at 7,851.25 on Monday at a premium of 2 points over the spot closing of 7,849.25. But, it saw contraction of 0.20 million open interests, taking total outstanding open interest (OI) to 13.77 million.
The general rule is that rising prices and a decline in open interest (OI) is a bearish trend. Most traders would like to sit on the sidelines this truncated week, as no clear trend seems to be emerging.
“We have no clear cues. We are in a truncated week and I do not expect 7,800 on the Nifty50 to be broken. I do not expect 7,900 to be broken at least till the expiry,” said Sandeep Wagle, Founder & CEO, Power My Wealth.
"Let us see where we go from there. I can only say the Nifty50 may stay in the 7,800-7,900 range till the F&O expiry. Better not prejudge the market at this point in time,” he said.
The India Volatility Index (VIX), a gauge of the market’s short-term expectation of volatility, increased 7.41 per cent and reached 17.08.
The volatility index is a measure of traders’ expectations of near-term risks in the market. So, a rise in the volatility index suggests greater volatility and uncertainty in the stock market. The Nifty call at strike price 7,900 for November expiry was the most active one with the addition of 0.67 million open interest.
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